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Financial management

ASSIGNMENT NUMBER 1

Cost of capital
AMIT KUMAR BABEL
34th BATCH
DIVISION-E
340558

Introduction= This assignment is based on cost of capital, in this assignment I select 2 companies

1) DR LAL PATH labs


2) SHILPA MEDICARE

Dr lal path labs = this company started in 1949 by Dr. s.k. lal, in Delhi.
In 2016 annual report shows that company earns 658 cr. Rs.
As revenue and the capital is mixture of equity share capital and longterm
borrowing. The perportion of equity and debt. Is 0.28:1

Shilpa medicare = this company

Dr lal path lab balance sheet 2016


Mar-16
EQUITIES AND LIABILITIES
SHAREHOLDER'S FUNDS
Equity Share Capital 82.68
Preference Share Capital 0
Total Share Capital 82.68
Reserves and Surplus 395.84
Total Reserves and Surplus 395.84
Total Shareholders Funds 478.51
Equity Share Application Money 0.73
NON-CURRENT LIABILITIES
Other Long Term Liabilities 23.51
Long Term Provisions 0
Total Non-Current Liabilities 23.51
CURRENT LIABILITIES
Short Term Borrowings 0
Trade Payables 40.58
Other Current Liabilities 17.41
Short Term Provisions 30.96
Total Current Liabilities 88.96
Total Capital And Liabilities 591.72
ASSETS
NON-CURRENT ASSETS
Tangible Assets 104.33
Intangible Assets 25.45
Capital Work-In-Progress 4.09
Intangible Assets Under Development 0
Fixed Assets 133.88
Non-Current Investments 11.59
Deferred Tax Assets [Net] 11.44
Long Term Loans And Advances 15.54
Other Non-Current Assets 3.2
Total Non-Current Assets 175.64
CURRENT ASSETS
Current Investments 62.59
Inventories 14.08
Trade Receivables 34.86
Cash And Cash Equivalents 226.43
Short Term Loans And Advances 71.51
OtherCurrentAssets 6.61
Total Current Assets 416.07
Total Assets 591.72
OTHER ADDITIONAL INFORMATION
CONTINGENT LIABILITIES, COMMITMENTS
Contingent Liabilities 23.96
CIF VALUE OF IMPORTS
Raw Materials 1.16
Stores, Spares And Loose Tools 0.02
Capital Goods 5.94
EXPENDITURE IN FOREIGN EXCHANGE
Expenditure In Foreign Currency 8.29
REMITTANCES IN FOREIGN CURRENCIES FOR DIVIDENDS
Dividend Remittance In Foreign Currency 0
EARNINGS IN FOREIGN EXCHANGE
FOB Value Of Goods 2.54
Other Earnings -
BONUS DETAILS
Bonus Equity Share Capital 50.32
NON-CURRENT INVESTMENTS
Non-Current Investments Quoted Market Value -
Non-Current Investments Unquoted Book Value 11.59
CURRENT INVESTMENTS
Current Investments Quoted Market Value -
Current Investments Unquoted Book Value 62.59

Shilpa medicare balance sheet 2016


------------
------- in
tandalone Balance Sheet Rs. Cr. -
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Mar 16

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS

Equity Share Capital 7.71


Total Share Capital 7.71
Reserves and Surplus 663.91
Total Reserves and Surplus 663.91
Total Shareholders Funds 671.62
NON-CURRENT LIABILITIES
Long Term Borrowings 0
Deferred Tax Liabilities [Net] 48.47
Long Term Provisions 3.9
Total Non-Current Liabilities 52.37
CURRENT LIABILITIES
Short Term Borrowings 69.59
Trade Payables 58.96
Other Current Liabilities 36.02
Short Term Provisions 0.46
Total Current Liabilities 165.04
Total Capital And Liabilities 889.03
ASSETS

NON-CURRENT ASSETS

Tangible Assets 348


Intangible Assets 7.23
Capital Work-In-Progress 89.09
Intangible Assets Under Development 0.28
Fixed Assets 444.61
Non-Current Investments 100.79
Long Term Loans And Advances 59.21
Total Non-Current Assets 604.6
CURRENT ASSETS
Current Investments 52.73
Inventories 124.66
Trade Receivables 71.27
Cash And Cash Equivalents 5.84
Short Term Loans And Advances 18.95
OtherCurrentAssets 10.98
Total Current Assets 284.43
Total Assets 889.03

OTHER ADDITIONAL INFORMATION

CONTINGENT LIABILITIES, COMMITMENTS

Contingent Liabilities 102.07

CIF VALUE OF IMPORTS

Raw Materials 323.92


Trade/Other Goods 0

EXPENDITURE IN FOREIGN EXCHANGE

Expenditure In Foreign Currency 18.75


REMITTANCES IN FOREIGN CURRENCIES FOR DIVIDENDS

Dividend Remittance In Foreign Currency 0.69

EARNINGS IN FOREIGN EXCHANGE

FOB Value Of Goods 500.31


Other Earnings -
BONUS DETAILS
Bonus Equity Share Capital 3.78

NON-CURRENT INVESTMENTS

Non-Current Investments Quoted Market Value -


Non-Current Investments Unquoted Book Value 100.79

CURRENT INVESTMENTS

Current Investments Quoted Market Value 59.63


Current Investments Unquoted Book Value -

Dr Lal PathLabs
---------
---------
- in
Standalone Profit & Loss account Rs. Cr.
---------
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-
Mar 16

12
mths

INCOME
Revenue From Operations [Gross] 765.4

Revenue From Operations [Net] 765.4

Total Operating Revenues 765.4

Other Income 20.41

Total Revenue 785.81

EXPENSES

Operating And Direct Expenses 168.13

Employee Benefit Expenses 133.07


Finance Costs 0.49
Depreciation And Amortisation Expenses 32.01
Other Expenses 260.35
Total Expenses 594.05
Mar-16

12
mths

Profit/Loss Before Exceptional, ExtraOrdinary Items And


191.75
Tax
Profit/Loss Before Tax 191.75

Tax Expenses-Continued Operations

Current Tax 61.03


Deferred Tax 4.34
Tax For Earlier Years 0.64
Total Tax Expenses 66
Profit/Loss After Tax And Before ExtraOrdinary Items 125.75
Profit/Loss From Continuing Operations 125.75
Profit/Loss For The Period 125.75
Mar-16

12
mths
OTHER ADDITIONAL INFORMATION

EARNINGS PER SHARE

Basic EPS (Rs.) 15.31


Diluted EPS (Rs.) 15.2

VALUE OF IMPORTED AND INDIGENIOUS RAW


MATERIALS

STORES, SPARES AND LOOSE TOOLS

DIVIDEND AND DIVIDEND PERCENTAGE

Equity Share Dividend 20.27


Preference Share Dividend 0
Tax On Dividend 4.13
Equity Dividend Rate (%) 25

Shilpa pl

Profit/Loss After Tax And Before ExtraOrdinary Items 110.31

Prior Period Items 0.02


Extraordinary Items 0

Profit/Loss From Continuing Operations 110.33

Profit/Loss For The Period 110.33

Mar-16

12 mths

OTHER ADDITIONAL INFORMATION

EARNINGS PER SHARE

Basic EPS (Rs.) 14.31


Diluted EPS (Rs.) 14.31
VALUE OF IMPORTED AND INDIGENIOUS RAW
MATERIALS

Imported Raw Materials 298.06

Indigenous Raw Materials 68.4

STORES, SPARES AND LOOSE TOOLS

Imported Stores And Spares 0

Indigenous Stores And Spares 0

DIVIDEND AND DIVIDEND PERCENTAGE

Equity Share Dividend 4.63

Tax On Dividend 0.93

Equity Dividend Rate (%) 60

Q)1. calculate the cost of equity (price earning method) ?

Ans. Cost of equity = Earnings per share

Market price per share

Dr. lal path= 15.31/999.95= 0.153 or 1.53%

Shilpa medicare= 14.31/655.89= 0.0218 or 2.18%

COST OF EQUITY IS WHICH COMPNY PAYS TO THEIR share holder as dividend, because they take risk
on behalf of the company

Comment=

Dr.lal path lab. Company have 1.53% cost of capital and shilpa medicare has 2.18 %
cost of capital that means it is Cleary shown that shilpa medicare has higher risk from investors
point of view.
Q)2.

Ans. Debt. Equity ratio = Debt.

Equity

A) Dr lal path = 23.51/82.68= 0.28


B) Shilpa medicare = 3.9/7.71= 0.5

Debt equity ratio = this ratio is used to measure the leverage of the company on the
proportion of debt and share holders equity.
For these companies I can say that shilpa medicare I having higher risk because of the loans
which are taken by them they have to pay the loan.

Q)3. = Discuss the capital gearing of the sector


Ans. I select pharma sector for that financial leverage is as follows
First of all we should know what is leverage, financial leverage means the risk which is
involved in the company in terms of monetary, leverage is a portion to which company is
using for its fix income instruments on bearing such types of loans, shares, bonds.
This is bearer by the eq. share holder of the company who are the rea owner of the
company.

Degree of financial leverage= earning before int. and tax

Earning before tax

For dr. lal path company = 192.25/191.76= 1.0025


For shilpa medicare = 144.83/144.81= 1.0001

Q)4.
Ans. The new avenue for new financing , my sector is pharma so the best way to financing
the sector is equity mutual funds, employee provided fund, purchase bonds of govt.
securities.

The end