N.B.: (1) Q) @) (4) () (REVISED COURSE) QP Code : CV-20380-20381 (3 Hours) [ Total Marks : 100 Revised pattern is applicable to regular students of A-Y. 2011-12 and 2012-13. It is also applicable to IDOL students who have taken admission in 2012-13. Question.No. 1 and 2 are compulsory and carry 20 and 16 marks respectively. Solve any four questions from questions Nos. 3 to 9, each carrying 16 marks. Working notes and assumptions should form part of your answers. Use of simple calculator is allowed. The following results are expected by XYZ Ltd. for January to July 2013, from which 20 you are required to prepare the Cash Budget. 1) The estimated sales, expenses etc. are as follows : (&.in lakhs) Particulars | Jan(®) | Feb (@) | (Mar =)| (Apr®) | (May =)[June =) [uly 2) Sales 70 80 80 100 100 120 130 Purchases 28 32 34 40 40} so] 36 Wages and Salaries 24 28 28 36 36] 40) 44 - Sundry Exp 10 12 12 12 4} ou] Receipt for Rent 4 - : 4 : : 4 Sale of Assets - . 40 S : : : 2. 20% of the sales are on cash and the balance on credit. 3. 1% of the credit sales are returned by the customer, 2% debts are irrecoverable, 50% of the good accounts are collected in the month of the sales and the rest, during next month. 4. The time lag in payment of Sundry Expenses and purchases is one month. Wages and salaries are paid with time lag of 15 days. 5. The company started its activities in Jan.2004 with cash balance of @ 10 lakhs. 6. The company keeps minimum cash balance of & 10 lakhs. Cash in excess of =14 lakhs is invested in Govt. Bonds in multiples of ¢1 lakh. Shortfall in minimum cash balance is made by borrowing from the bank. Con. 11357 & (a)-14. [ TURN OVER2 QP Code : CV-20380 2. (a) Select the appropriate alternative and rewrite the full sentence. 1) Return on capital employed is a relationship between + Net operating profit and loan + Net operating profit and capital employed + Gross profit and sales + Gross profit and total assets. 2) Optimum capital structure implies a ratio debt and equity at when would be least and market value of the firm would be highest. + Marginal cost of capital . WACC + Cost of debts + Opportunity cost 3) Zero interest bonds are issued at . Discount . Premium: . Par + None of the above. 4) Relationship between dividend per share and earning per share is known as + Dividend payout + Dividend yield + Dividend per share + EPS 5) Tax saving on retrenchment compensation is treated as, . Cost of tax . Cash outflow . Cash inflow . None of the above. 6) Public deposits are accepted for a maximum of * Qyears + 3 years + Syears + Lyear Con. 11357-14. [ TURN OVER(b) (©) 3 QP Code : CV-20380 Match the following groups and rewrite the full sentence. 5 Group ‘A’ Group ‘B’ 1) Discounting (i) Ordering cost 2) Composite cost (ii) Aspect of receivable management 3) Negative working capital (iii) Deciding present value of future amount 4) Cost of placement of order (iv) Carrying cost 5) Terms of payment (v) Weighted average cost of capital (vi) Excess of current liabilities over current assets. (vii) Expected cost. State whether the following statements are true or false are rewrite them. 5 1) _ Excessive inventory creates a shortage of cash. 2), The objective of sensitivity analysis is to find out the most sensitive factor. 3)’ ‘Higher capital gearing shows lower commitment on account of interest. 4) Operating leverage is calculated by dividing contibution by EBT. 5) Decision relating to issue of shares is concerned with working capital. 3. You are required to complete the following Balance Sheet as at 31st March 2013 of 16 Anand Pvt.Ltd. Balance sheet as on 31.3.2013. Labilities z Assets = Equity Share Capital | 14,00,000 Fixed Assets 7 Reserve & surplus ? Investment ? ‘Loans 9,00,000 Current Assets Creditors ? Stock ? Bank Overdraft 1,33,000 Debtors ? Cash 2 Total ? Total ? 1) 2 3) 4) 5) 6) Dn 8) Ratios of the company are : Reserve and Surplus to Net Worth Ratio = 1:6 Sales to Net worth ratio = 4S: Debtors Turnover Ratio = 6 times, however, 20% of the sales are cash sales. Gross profit Ratio 20% on cost. Current Ratio 2°5:1 Acid Test Ratio 4:3 Stock Turnover Ratio = 5 times (based on closing stock) Fixed Assets Turnover Ratio (COGS/Fixed Assets) is 7 times. Con. 11357-14, [TURN OVER4 QP Code : CV-20380 Unique Company Ltd. intends to expands its assets by 60% by the end of the current 16 year. the capital structure of the company is as follows : zg Equity share capital 12,00,000 11% preference share capital 3,00,000 8% Debentures 5,00,000 Total & 20,00,000 New Debentures would be sold having 15% rate of interest and will be sold at par. Preference shares will be carry 13% rate of dividend. Expected equity dividend per share is Rs. 11.25. Expected growth rate of 7%. Current market price of each equity share is Rs. 90. Cost of retained earning is 18.25%. Estimated Retained Earnings for the year are & 1,20,000. The corporate Tax is 30%. You are required to calcualte. i) Therequired amount of Capital Budget for expansion. ii) The amount of additional Equity capital to be raised by issuing new shares. iii) Calculate the Weighted Average Cost of Capital for intended expansion. Mayuri Ltd. has equity share capital of € 25 lakhs, divided into shares of Rs.100 each. 16 Itwishes to raise further & 10,00,000 for expansion programme, The company plans to the following Financing Alternatives. 1) Byissuing Equity Share capital only. 11) %5,00,000 by issuing Equity shares and Rs. 5,00,000 by 10% Debentures. I) = 5,00,000 Equity Shares, 3,00,000 8% preference share capital and € 2,00,000 10% Debentures. IV) €5,00,000 10% Debentures and € 5,00,000 8% preference share capital. ‘You are required to suggest the best alternative giving your comments, assuming that the estimated EBIT after expansion is € 5,00,000 and corporate Tax rate is 30%. From the following prepare Income statement of company A and B. 16 ACo. BOo. Financial Leverage 4:1 3:1 Interest Rs. 6,00,000 Rs. 7,00,000 Operating Leverage 31 41 Variable cost to sales 66.66% 50% Income Tax rate 30% 40% No. of Equity Shares 1,00,000 70,000 Also calculate and comments on EPS of the company. Con. 11357-14. [ TURN OVER5 QP Code : CV-20380 J.K.Ltd. has annual sales of ¢ 80 lakhs. 16 It is currently extended 20 days credit to the dealers. It is felt that sales can pick-up considerably if the dealers are willing to carry increased stocks, but the dealers have difficulty in financing their inventory. The company is, therefore considering shift in credit polilcy. The following information is available. The average collection period is now 20 days. Variable cost are 60% on sales Fixed cost & 12,00,000 p.a. Required (pre-tax) return on investment is 30% p.a. Credit policy ‘Average collection | Annual Sales period in days (€ in lakhs) iE 30 100 M 40 110 N 45 130 ° 60 140 Determine which policy the company should adopt, assuming that 1 year = 360 days and Debtors are valued at total cost (for the purpose of calculation of investment in debtors.) Konak Ltd. is considering two mutually exclusive project investments, either £195 16 lakhs in Fully Automatic Machine or & 150 lakhs in Semi-Automatic Machine. Both the machine have scrap value at the end of eight years to their respective W.D.V. You are given the present value of ¢ 1 @ 10% rate of 8 years and estimated profit before depreciation and Income Tax as follows : Year PV of ¢1 Fully Automatic | Semi-Automatic Machine( € in lakhs)|Machine (¢ in lakhs) 1 0-909 36 23 2 0-826 38 24 3 0-751 40 25 4 0-683 42 26 5 0-621 44 27 6 0:564 46 28 1 0513 47 29 8 0-467 48 30 The company provides Depreciation on Machinery @ 10% on W.D.V. basis and pays income tax @ 40% You are required to calculate NPV of each machine @ 10% and suggest which Machine to be purchased. Con. 11357-14. [TURN OVER9. Write short notes on (any four) :~ (a) (b) (c) @ (e) () Depreciation as a source of finance Discounted cash flow technique Limitation of Ratio Analysis Operating Lease Importance of cost of capital Capital gearing & trading on equity. Con. 11357-14. QP Code : CV-20380 [TURN OVER 16N.B.: 7 QP Code : CV-20381 (OLD COURSE) (3 Hours) [Total Marks : 100 (1) Old pattern is applicable to regular students of academic year 2010- 11 earlier year and IDOL students of academic year 2011-12 and earlier years. (2) Question No. 1 is compulsory and carries 20 marks. (3) Solve any four questions from questions Nos. 3 to 9, each carrying 20 marks. (4) Working notes and assumptions should form part of your answer. (5) _use simple calculator is allowed. ‘The following results are expected by XYZ Ltd for January to July 2013, from which 20 you are required to prepare the Cash Budget. 1. The estimated sales, expenses etc. are are follows : (in lakhs) Particulars | Jan.<|] Feb.e| Marz] Apr.e] May | June &| July = Sales a 0 | 100 | 100 | 120] 130 Purchases 28 | 32 34 | 40 | 40 | so | 56 Wages & Salaries 24 | 28 28 | 36 | 36 | 40 | 44 SundryExp. | 10 | 12 12 | 12 | 14] 14 4 Receipt for Rent 4 : - 4 - - 4 Sale of Assets] - : 40 : - : : 2. 20% of the sales are on cash and the balance on credit. 3. 1% of the credit sales are returned by the customer, 2% debts are irrecoverable, 50% of the good accounts are collected in the month of the sales and the rest during next month. 4. Thetime lag in payment of Sundry Expenses and purchases is one month. Wages and Salaries are paid with time lag of 15 days. 5. The company started its activities in Jan.2004 with cash balance of Rs.10 lakhs. 6. The company keeps minimum cash balance of Rs.10 lakh. Cash in excess of Rs.14 lakhs is invested in Govt. Bonds in multiples of ¢1 lakh. Short fall in minimum cash balance is made by borrowing from the bank. Con. 11357(a)-14. [TURN OVER8 QP Code : CV-20381 2. You are required to complete the following Balance Sheet as as 31st March 2013 of 29 Anand Pyt.ltd. Balance Sheet as on 31.3.2013. Liabilities z Assets ze Equity share capital | 14,00,000 | Fixed Assets ? Reserve of surplus 2 | Investment ? Loans 9,000.00 } Current Assets Creditors 2 | Stock 2 Debtors 2 Bank Overdraft 133,000 | Cash 2 Total : 2 Total: 2 Ratios of the company are : SAAVAYNS Reserve and surplus to Net Worth Ratio= 1:6 Sales to Net Worth Ratio = 4.5 :1 Debtors Turnover Ratio = 6 times, however, 20% of the sales are cash sales. Gross Profit Ratio 20% on cost. Current Ratio 2.5:1 Acid Test Ratio 4:3 Stock Turnover Ratio - 5 times, (based on closing stock) Fixed Assets Turnover Ratio (COGS/Fixed Assets) is 7 times. From the following, prepare Income statement of Company A and B. » ACo. BCo. [Financial Leverage 4:1 Sil Interest = 6,00,000 = 7,00,000 Operating Leverage 301 41 Variable cost to sales 66-66% 50% lincome Tax rate 30% 40% INo. of Equity Shares 1,00,000 70,000 Also calculate and comments on EPS of the company. Con. 11357(a)-14. [ TURN OVER9 QP Code : CV-20381 IK. Ltd. has annual sales of Rs.80 lakhs. It is currently extended 20 days credit to the dealers. It is felt that sales can pick-up considerably if the dealers are willing to carry increased stocks, but the dealers have difficulty in financing their inventory. The company is, therefore considering shift in credit policy. The following information is available. The average collection period is now 20 days . Variable cost are 60% on sales. Fixed cost & 12,00,000 p.a. Required (pre-tax) return on investment is 30% p.a. Credit policy ‘Average collection _ [Annual Sales period in days (& in lakh) Es 30 100 M 40 110 N 45 130 oO 60 140 Determine which policy the company should adopt, assuming that 1 year= 360 days and Debtors are valued at total cost (for the purpose of calculation of investment in debtors.) Kanak Ltd. is considering two mutually exclusive project investments, either ¢ 195 lakhs in Fully Automatic Machine or ¢ 150 lakhs in Semi-Automatic Machine. Both the machine have scrap value at the end of eight years to their respective W.D..V. You are given the present value of € 1 @ 10% rate of 8 years and estimated profit before depresication and Income Tax as follows : Year PV ofe1 Fully Automatic Semi-Automatic Machine ( in lakhs) | Machine (&_in lakhs) 1 0-909 36 23 2 0-826 38 24 3 0-751 40 25 4 0-683 42 26 5 0-621 44 27 6 0-564 46 28 7 0-513 AT 29 8 0-467 48 30 The company provides Depreciation on Machinery @ 10% on W.D.V. basis and pays income tax @ 40%. You are required to calculate NPV of each machine @ 10% and suggest which machine tobe purchased. Con. 11357(a)-14. [TURN OVER10 QP Code : CV-20381 ‘You are required to prepare Cash Flow Statement as per AS-3 for the year ended 31st 20 Dec.2012 from the following Balance Sheet as on 31st Dec. and additional information of Mis. Rejeshree Co. Ltd. Balance sheet Liabilities 2011 2012 Assets 2011 2012 Equity share capital | 2,00,000 | 5,00,000 |Fixed Assets 6,45,000 | 5,81,000 Preference Share Capital 3,00,000 = [Investment (orgie) 60,000 80,000 Securities Premium 50,000 80,000 |Stock 1,00,000 | 1,50,000 General Reserve 60,000 | 1,10,000 |Debtors 1,40,000 | 1,50,000 Profit & Loss A/e 70,000 | 1,00,000 |Bills Receivables] 50,000 | 75,000 10% Debentures 2,000,00 - |Prepaid expenses} 10,000 9,000 12% Debentures - | 1,00,000 |Cash 5,000 7,000 Creditors 50,000 75,000 |Bank 15,000 | 23,000 Bills payable 40,000 30,000 |Preliminary Proposed Dividend 30,000 50,000 |Expenses 10,000. - Provision for Tax 35,000 30,000 10,35,000 | 10,75,000 110,35,000 | 10,75,000 Additional informations : 1. Machinery worth ©40,000 sold for & 45,000/- 2. Furniture purchased during the year amounted to 265,000/- 3. 10% Debentures were given option of conversion into 12% Debentures or redemption in cash, accordingly half of the debenture holders exercised option in favour ofnew 12% Debentures and rest redeemed in cash. 4. Preference shares redeemed at *10% premium. The premium on Redemption has been debited to Securities Premium Account, New equity shares were issued at premium, 5. Provision for tax made for the year & 40,000/- 6, Interim dividend paid during the year € 25,000. Proposed Dividend for the year 2011 had been paid during the year 2012. Con. 11357(a)-14. [ TURN OVER"1 QP Code : CV-20381 (a) What points should be considered while estimating working capital requirements of 10 an organisation ? (b) Explain the various aspects of cash management. 10 . (a) What do you mean by operating leverage and financial leverage ? Explain with 10 examples. (b) What do you mean by weighted Average Cost of capital ? What is the procedure of 10 calculation of weighted Average Cost of Capital ? ). Write short notes on (any four) :— 20 (a) Depreciation as a source of finance. (b) Discounted cash flow technique (c) Limitation of Ratio Analysis (a) Operating lease (e) Importance of cost of capital (£) Capital Gearing and trading on equity. Con. 11357(a)-14.