FM Revision

All
Important Concepts
◦

by
CANitin9I
⑨ Edu91 .

All the Best to ofyou

all .

Yours
NitinGwˢ
 Ratios

-60 Ratio =

Ignn÷IT→ Linked

② Rations Times, %
,
-
: -

g /months/
Days - -
-

⑦ Ratio ( Higher is belted

Profitability
④ azaueogatihaimn.TT
Rate
←
Jissedekh
Gross Profit
-_§÷gap
,waf%hue Profit
① ,

is
ratio
→
This
②
operating profit
-_

ofgggtiyae.my#botufyfasinest
ratio
← yenmoidavati
Khai '

③
Netihofit gggfy-y.gg profit
asnit.iq#:ingitans)
ratio =
,

( also
⑨
PIVHatio-coztawgtim-J-syet.ae dhani Kahani
Lhowkautahai,
dates
-
✗ ✗✗
variable att
as
fined cost is not

Subtracted
yet
-
.

Contribution
⑤ operating ratio

# Hoo

operating office✗Admin Exp

RYF-atio-ot.ge#-sYPFfit-x1aos0PcosLaFIt--( 98-1 solipsist
Netsales

* opekating Profit ratio + operating cost ratio too:/

=

* Plvratio + Variable castrati =

look

t-BEP-mos-%fA-oo.ee
Financial Analysis & Planning Ratio Analysis BY: CA NITIN GURU

Chapter 3
FINANCIAL ANALYSIS & PLANNING RATIO
ANALYSIS
Question 1.
What is the significance of ratio analysis in decision making?

Solution:
Ratio Analysis is a useful tool in the following aspects-
1. Inter-Firm & Intra comparison: -a-vis the indusstry can be ratios with the
s.
2. Budgeting: Ratios are helpful in planning and forecasting the business activities of a firm for future periods, e.g. estimation
of working capital requirements.
3. (a) Evaluation of Liquidity: The ability of a firm to meet its short-term payment commitments is called liquidity. Current
Ratio and Quick Ratio help to assess the short-term solvency (liquidity) of the firm.
(b) Evaluation of profitability: Profitability Ratio, i.e. Gross profit Ratio, Operating profit Ratio, Net profit Ratio are basic
indicators of the profitability of the Firm. In addition, various profitability indicators like Return on Capital Employed
(ROCE), Earnings per share (EPS), Return on Assets (ROA), etc. are used to assess the financial performance.

Question 2. [NOV 09]

What are the Limitations of Financial Ratio analysis?

Solution:
The limitations of Financial Ratio analysis are as follows:
1) Window Dressing:- Sometimes attempts are made to manipulate the accounts to show favourable ratio, when they are
not.
2) Seasonal factors:- These factors influence the financial data and there is no uniform pattern during the year, therefore
ratios may not indicate correct situation.
3) Lack of Standards:- Ther
ratio should be 2:1.
4) Interdependence:-Decision taken on the basis of one ratio may be incorrect when a set of ratios is analysed.
5) Financial data are badly distorted by inflation:- Historical values may be substantially different from true values. These
distortions are also carried in the financial ratios.

TYPES OF RATIO
I. PROFITABILITY RATIOS BASED ON SALES:
These ratios measure how efficiently a company has generated profit on sales and investment.

=
i. Gross Profit Ratio= (In %)
Gross Profit = Gross Profit as per Trading Account.
Sales = Sales net of returns.
Significance = Indicator of Basic Profitability.

ii. Operating Profit Ratio= (In %)

Operating Profit = Sales Less Cost of Sales
[OR]
Net Profit as per P & L Account
(+) Non-Operating Expenses (e.g. Loss on sale of assets, preliminary Expenses written off,
etc.)
(-) Non-Operating Income (e.g. Rent, Interest & Dividends received)
Sales = Sales net of returns.
Significance = Indicator of Operating Performance of business.

Contact no. 9211122778 Page 3.1

 Ratio
Coverage

==1oTir@
⑦ Interest
coverage E-BIT
ratio =

Interest

Intensest Petite Int dene Ke Fitna

→ Dene Se , life
amount available hai, V0 Numerator met

aayega .

⑦
⑨ Pref Dividend EAT
Times
Covekgoratio
=

,÷µnd
⑦⑥ EquityDividend
EAES
Coverage ratio =

EquityDividend

EAT
Nonncosh Expt
Nonopehatigtxp
⑤ Debtseauia Interest # Dept Amortization
Coverage ratio
=

Interest + Installment(
Dominique
-

Denominator Mei hum Int#&Dñnw# party Ioan

Show Karenga (our obligations towards Debt)

Numerator met hung Vop€ Show Kakenge To

Int ✗ Principle Instalment pay Kanne Helge use Kiya

Toa Lapita hat .
Financial Analysis & Planning Ratio Analysis BY: CA NITIN GURU

=
iii. Net Profit Ratio= (In %)
Net Profit = Net profit as per P & L A/c (either before tax or after tax, depending upon data).
Sales = Sales net of returns.
Significance= Indicator of Overall Profitability.

iv. Contribution Sales Ratio [or] Profit Volume Ratio=

Contribution = Sales Less Variable Costs.
Sales = Sales net of returns.
Significance = Indicator of Profitability in Marginal Costing.

II. COVERAGE RATIOS:

The soundness of firm, from the view point of long term creditors & Preference shares, lays its ability to service their

.
client.
i. Debt Service Coverage Ratio= (In Times) [MAY 07, MAY 09, MAY 14]
Earnings for Debt Service = Net Profit after Taxation
(+) Interest on Debt Funds
(+) Non-Cash Operating Expenses(e.g. depreciation & amortizations)
(+) Non-Operating Items/Adjustments (e.g. Loss on sale of Fixed Assets, etc.)
Interest + Instalment = Interest + Principal, i.e.
Interest on Debt
(+) Instalment of Loan Principal
Significance =Indicates extent of current earnings available for meeting commitments of interest and instalment.
Ideal Ratio must be between 2 to 3 times.

=
ii. Interest Coverage Ratio= (In Times)
EBIT = Earnings before Interest and Tax.
Interest = Interest on Debt
Significance= Indicates ability to meet interest obligations of the current year. Should be greater than 1.

iii. Preference Dividend Coverage Ratio= (In Times)

EAT = Earnings after Tax.
Preference Dividend = Dividend on Preference Capital.
Significance= Indicates ability to pay dividend on Preference Capital. Should be greater than 1.

III. TURNOVER/ACTIVITY/ PERFORMANCE RATIOS[NOV 06]

These ratio show how efficiently a company is using its assets to generate sales, e.g. Fixed Assets Turnover ratio,
Debtor Turnover ratio etc.
i. Raw Material Turnover Ratio= (In Times and Days)
Cost of Raw Material Consumed = Opening Stock of Raw Materials
(+) Purchases of Raw Materials
(-) Closing Stock of Raw Materials
Average Stock of Raw Material=
Significance= Indicates how fast/regularly Raw Materials are used in production.

ii. WIP Turnover Ratio= (In Times and Days) Production

Factory Cost = Materials Consumed + Wages + POH
→ overheads
Average Stock of WIP =
Significance= Indicates the WIP movement/production cycle.
-

Contact no. 9211122778 Page 3.2

 Tulnoreeekatios (Times)
"" "" "°

"
"" "" " """

¥0M
&TR=É DTR
-_÷t¥aas CTR -

Averagedtook All .me

Payable

Tse!
!aaa=9Hai%rÑa¥q)
a-

&to¥ LEY Ckediteoestklocity

Stock 360/52/12 Debtor 36/52/12
Y%%fy=¥¥
= =

Velocity 9Th Velocity DTR

f -

¥gj a question provides Turnover ratio in

Days/weeks etc:

you must know it is Velocity and not

actually
-

Tunneled
.

for wcm_ chapter

Average collection Peuiod =
Debtors
velocity-_

3,4cg
Average payment Period creditors velocity __{§_r
-

=
Financial Analysis & Planning Ratio Analysis BY: CA NITIN GURU

¥
iii. Finished Goods or Stock Turnover Ratio= (In Times and Days)
Cost of Goods Sold = (a) For Manufacturers: OpeningStock of FG (+)Cost of Production (-) Closing Stock of FG.
(b) For Traders: Opening Stock of FG + Cost of Goods Purchased (-) Closing Stock of FG.
Average Stock of Finished Goods =
Significance =Indicates how fast inventory is used/sold. High Turnover shows fast moving FG. Low Turnover may
mean dead or excessive stock.

iv. Debtors Turnover Ratio= (In Times and Days)

Credit Sales = Credit Sales net of returns
Average Accounts Receivable = Average Accounts Receivable (i.e. Debtors + B/R)

Significance = Indicates the speed of collection of Credit Sales/Debtors.

v. Creditors Turnover Ratio= (In Times and Days)

Credit Purchases = Credit Purchases net of returns
Average Accounts Payable = Average Accounts Payable (i.e. Creditors + B/P)

vi. Working Capital Turnover Ratio= (In Times and Days)

[Also called Operating Turnover (or) Cash Turnover Ratio]
Turnover = Sales net of returns
Net Working Capital = Current Assets Less: Current Liabilities (Average of Opening and Closing balances may be taken)
Significance= Ability to generate sales per rupee of Working Capital.

vii. Fixed Assets Turnover Ratio= (In Times and Days)

Turnover = Sales net of returns
Net Fixed Assets = Net Fixed Assets (Average of Opening and Closing balances may be taken)
Significance= Ability to generate sales per rupee of Fixed Assets.

viii.Capital Turnover Ratio = (In Times and Days)

Turnover = Sales net of returns
Capital Employed = (Average of Opening and Closing balances may be taken)
Significance = Ability to generate sales per rupee of long-term Investment.

IV. CAPITAL STRUCTURE RATIOS

These ratios measure the extent to which a company which has been financed by long term debt obligations like Debt
equity ratio. It measures the ability of an enterprise to survive over a long period of time.
i. Debt to Total Funds Ratio =
Debt = Borrowed Funds (or) Loan Funds
=¥
= Debentures + Long-Term Loans from Banks, Financial Institutions, etc.
Total Funds = Long Term Funds (or) Capital Employed (or) Investment
= Debt + Equity......Liability Route
= Fixed Assets + Net Working Capital ..........Assets Route
Significance = Indicator of use of external funds. Ideal Ratio is 67%.

ii. Equity to Total Funds Ratio =

Equity = Net Worth (or) (or)
=¥" Funds (or) Owners Funds (or) Own Funds

Contact no. 9211122778 Page 3.3

 Ratios
Capital Structure .

Capital Employed or Investment-8

Longterm
funds
E&H Debt
•
ESC
•
Debentures
Pal
Longterm
•

•
Reserves Loans
SecurityRenmei.fm
*
-

Net
wrethoeshaeeehddehsfundosoee Equity Catrnanyplates
ROI /ROCF RO Shareholdersfunds R0Equi_#
Relaunch Investment
Greenness capital Retaenontvetwoeetn
Employed ppeTa⑦
ROIE-EBT-t-oROS-n-EAT-aROE-E-AESOESHF-PS.cl
-

Debt ESME ESHFTPSC

R0I=EBI#
or

Capital Employed
@
ROI -_EATñeas±
Capital employed
⑦ Debt
Equity Ratio Debt Debt
: =
=

Equity ESHFTPSC
⑦ Debtto Totalfunds
D%f¥→y
=

⑤ Equity to Totdfunds Equity =

DTE

Equity Radio
D¥F_ty=¥=+psc
Debt : -_

Greening Radio
¥sI¥_
=

A B

4"
III. 90%
_=_
 BlS_

|
SHE
→ E-
-

Equity FA
-

↳ Psc -

Debt ✓
CA -

C L
=
- =
Capital Employed =
E-tc +Debt

+Dat
Equity
capital employed FA + CA CL
-
=

@ FA + we

/
H¥ ¥a¥¥I

t-A-CA-CL-otalts et-c.es#Notes:-
Equity to Total capital prop Ratio
=¥¥
ESHE.LY#--ESIg-AtPsc--ESIEI F-
*

E{w¥f-
=
 Financial Analysis & Planning Ratio Analysis BY: CA NITIN GURU
= Equity Share Capital + Preference Share Capital + Reserves & Surplus Less: Miscellaneous Expenditure
(as per Balance Sheet) and Accumulated Losses.
Total Funds = Long Term Funds (or) Capital Employed (or) Investment
= Debt + Equity......Liability Route
= Fixed Assets + Net Working Capital ..........Assets Route
Significance = Indicates Long Term Solvency, mode of financing and extent of own funds used in operations. Ideal
Ratio is 33%.

iii. Debt Equity Ratio =

Debt = Borrowed Funds (or) Loan Funds
= Debentures + Long-Term Loans from Banks, Financial Institutions, etc.
Equity = Net Worth (or) Funds
= Equity Share Capital + Preference Share Capital + Reserves & Surplus Less: Miscellaneous Expenditure (as
per Balance Sheet) and Accumulated Losses.
Significance= Indicates the relationship between Debt & Equity. Ideal Ratio is 2:1. Axed rated
zinni
→ Numeeeatokmeivosouecesaayeyi Jehan Rai

iv. Capital Gearing Ratio =C ) Denominator Mei v0 Soueuaaygizisrni Tired

rated Oetkenhai
( →
Nahi
.

Preference Capital + Debt = Preference Share Capital and Debt i.e. Debentures + Long-Term Loans from Banks, Financial
Institutions, etc.
Equity Shareholders Funds = Equity Share Capital Less Preference Share Capital i.e.
= Equity Share Capital + Reserves & Surplus Less: Miscellaneous Expenditure (as per
Balance Sheet) and Accumulated Losses.
Significance = Show proportion of Fixed Charge (Dividend or Interest) Bearing Capital to Equity Funds, and the extent

)
- reoaasaai

⑥ITALY:L;
of advantage or leverage enjoyed by Equity Shareholders.
→ Net worth me se kine % Paisa Malikone

µ v. Proprietary Ratio =
Proprietary Funds = Net Worth (or)
→ *-☒*I
= Equity Share Capital + Preference Share Capital + Reserves & Surplus Less: Miscellaneous
Expenditure (as per Balance Sheet) and Accumulated Losses.
Total Assets = Net Tangible Fixed Assets (+) Total Current Assets
Significance = Shows

vi. Fixed Asset to Long Term Fund Ratio = =

¥pioyed E¥¥+Ñt =

Fixed Assets = Net Fixed Assets, i.e. Gross Block (-) Depreciation
Equity
Long Term Funds = Debt + Equity......Liability Route
= Fixed Assets + Net Working Capital ..........Assets Route
Significance= Shows proportion of Fixed Assets (Long-Term Assets) financed by long-term funds. Indicates the
financing approach followed by the Firm, i.e. Conservative, Matching or Aggressive. Ideal Ratio is less than one.

[yeh ]
Ratio measure Kaali hai Ki ,
hong teems funds
Mei Se Kitne % Amount
V. LIQUIDITY RATIOS Mei lag a hua hai .
LongtermAssets G- A)
These ratios show ty to meet its short term financial obligation like current ratio and quick ratio.
i. Current Ratio=
Current Assets = Inventories/Stocks
(+) Debtors & B/R
(+) Cash & Bank
(+) Receivables
(+) Accruals
(+) Shot Term Loans
(+) Marketable Investments/Short Term Securities
Current Liabilities = Sundry Creditors
(+) Outstanding Expenses
(+) Short Term Loans & Advances (Cr.)
(+) Bank Overdraft/Cash Credit

Contact no. 9211122778 0 Page 3.4

 .am#5Josoeuteaiawie
Assets

diovidts dfo nloe ouiws sd.Debtce es.BR

%:& Bank

Asset

Atom

PrepaidExpenses

}GY¥¥ties
Yount
•
Kleeditoees
•
BIP
•
olswcges
• 0150117
•
"sextons,
Liabilities
•
Bank OLD
•
Casnceodits
 ① Current
ratio
EAT
=

Question is Silent, we will

haoeto Solve
by both the

qq.ua#5ohmulaeo9dieuid
② Quick Asset Ratio
Asset Ratio
=

TL
os Acid Test Ratio

②
Absolute liquidity
ratio
=

÷liaaidA_ssts

④ Basic Defence =
Quick Assets
Interval Measure
Cash Exp per day

cash
Extspeeday = AnnualExpense -

Non Cash Exp

Numbed
afdays (38009365)
 ⑦ coverage Ratios

Thales xxx
-
VC
contribution ✗
-

FC (→

EarningBefore IntkTa✗EBIT--
-

Interest

Earning Befoul Tax EBR

Tax
Earning After Tax EAT

pref Dividend e)
-

Earning available to
Equity Shares EA④ → nogÑ¥7oas=E③
-

EquityDividend
÷
Noofeevity =D④
Shares

Retained Fanning
EPs DPS
-

= RE Pershore

EAT
⑤ Dividend coverage =

Ratio prefab + EquityDividend

Financial Analysis & Planning Ratio Analysis BY: CA NITIN GURU
(+) Provision for Taxation
(+) Proposed Dividend
(+) Unclaimed Dividend
Significance = Ability to repay short-term liabilities promptly. Ideal Ratio is 2:1. Very high Ratio indicates existence of
idle Current Assets.

ii. Quick Ratio= OR Quick Assets / Current Liabilities

(Also called Liquid Ratio [or] Acid Test Ratio)
Quick Assets = Current Assets
(-) Inventories
(-) Prepaid Expense
Quick Liabilities = Current Liabilities
(-) Bank Overdraft
(-) Cash Credit
Significance = Ability to meet immediate liabilities. Ideal Ratio is 1:1

iii. Absolute Cash Ratio [or] Absolute Liquidity Ratio =

Cash + Marketable Securities = Cash in Hand
(+) Cash at Bank (Dr)
(+) Marketable Investments/Short Term Securities
Significance = Availability of cash to meet short-term commitments. No ideal ratio as such. If Ratio > 1, it indicates
very liquid resources, which are low in profitability.

iv. Basic Defence Interval Measure= (In days)

Quick Assets = Current Assets
(-) Inventories
(-) Prepaid Expenses
Cash Expenses per Day =
Cash Expenses = Total Expenses (-) Depreciation& write-offs.
Significance= Ability to meet regular Cash Expenses.

VI. OVERALL RETURN RATIOS OWNER VIEW POINT

These ratios are especially important for investor while analysing information about a company. This analysis helps the
investors to decide about a company as an investment opportunity at a point of time. These ratios are known as Stock
market ratios, investment ratios and market test ratios.

i. Return on Investment (ROI) [or] Return on Capital Employed (ROCE) =

Pre-tax ROCE: =

Post-tax ROCE: =
Either pre-tax or post-tax ROCE may be computed.
Pre-tax ROCE is generally preferred for analysis purposes.
Capital Employed = Investment
= Equity + Debt
Significance = Overall profitability of the business of the business on the Total Funds Employed.

ii. Return on Net Worth (RONW) =

Pre-tax RONW: =

Post tax RONW: =

Either pre-tax or post-tax ROE may be computed.
Post-tax ROE is generally preferred for analysis purposes.

Contact no. 9211122778 Page 3.5

 Betatron Assets → Easiness me Assets Pau Kitna

% Profit Kamaya .

iss formulae met ek

ROA
PA# mistake hai , ki
=
too =
,

Jat Denominator met Asset liye

hai , eenn Assets Bnei Debt Ka
Paisa Ahi Laga Hai, Toh numerator
⑨ Mei Debt
Kieahning Included
Kyu Nahi hai .

Ro A ⇐ EBITG -

telco =

Assets

or

ROA
EAfgg¥-nI°
=
 Financial Analysis & Planning Ratio Analysis BY: CA NITIN GURU

Funds
Significance iness.

iii. Return on Assets (ROA) =

Pre-tax ROA: =

Post-tax ROA: =
Either pre-tax or post-tax ROA may be computed.
Pre-tax ROA is generally preferred for analysis purposes.
Average, i.e. ½ of Opening & Closing Balances of any of the following items
(a) Total Assets, (or)
(b) Tangible Assets, (or)
(c) Fixed Assets.
Significance = Indicates Net Income per rupee of Average Total Assets or Tangible or Fixed Assets.

iv. Earnings per Share (EPS)=

=

¥ImÉ÷ÉguitysnaT
Residual Earnings, i.e. EAT (-) Preference Dividend
Number of Equity Shares outstanding =

ERE
E2Y€g
MPS_ = =

Significance = Income per share, whether or not distributed as dividends. PS 1

v. Dividend per share(DPS)= ke

Profits distributed to Equity Shareholders. ki
earning
'
E Kitwe
Rotayyauhai
'
1
Significance= Profits distributed per Equity Share.
→
Tani
Shareholders
liye
vi. Price Earnings Ratio (PE Ratio)= [MAY 11] E dene
Average Market price (or closing Market price) as per Stock Exchange quotations. (Market price per
share = MPS)
Significance = Indicates relation Company.

vii. Dividend Yield (%)=

Dividend
Average MPS (or Closing MPS) as per stock Exchange quotations.
Significance = True return on Investment, based on Market Value on Market Value of Shares.

-
viii. Book Value per Share=
Equity (or) Net Worth
Number of Equity Shares outstanding =

Significance= Basis of Valuation of Shares based on Book Values.

ix. Market Value to Book Value=

Average MPS (or Closing MPS) as per stock Exchange quotations.
Significance= Higher ratio indicates better position for Shareholders in terms of return & capital gains.

VII. CASH GENERATING EFFICIENCY RATIOS

i. Cash Flow Yield =
ii. Cash Flow to Sales =

Contact no. 9211122778 Page 3.6

 DiuidendPaid=I#
Face value of Market EPS=2
&hakl= 2=10 pnieafphaue , 2=120

¥s→w <
Dividend
Dividend
Dividend
Payout
Declared 30% yield __DµpP§_xro ratio
__¥¥
=

to
Dividend Dividend
is
always =§p1w
declared onface Value yield ¥710 Divided
=

-_
boy
f- ✗ 10--301
1¥% Payout
coverage Ratios =

•
Int Cov . Radio = EBIT_
Int

Ratio
Pref Div Cor
°
.
=

PrefDiv
Equity Divan Ratio EAI
• -
-

Div
Eg
Debtfeeuiacovelafe
'°=¥÷¥É¥d•ie
•

Rat

( Principle]
 Conceptacle:
-
Aston
① of
STR __

In

② op#k astern

-
STR -

¥
333
opstckcesfiirii-fpst.tn clstookv

1+-0-1*1
STR -
⇐

⑦ Fon s
¥10k
←
do, that these two are
compatible
 DuPont

••s-×¥-#
¥ ✗
Bz =
g-

safety ✗
¥A-a
=

defeat

Du Pont Analysis Fired Asset

fined Asset ✗

Capital Tunnel Radio = Tunnel Radio To

Capitalemployed

* = * ✗
EE
CE FA CE

NP
Margin ✗ Asset Turnover ✗
Equity multiplier
=
ROE

(¥aas)×@Fsset)×(¥F÷) =

÷y
T**NP Mangin ✗ ( Etuenoref Ratio = ROI CROCE)

C¥aaD×E¥s→=C¥→
New
chapter
Costafcapital
To calculate the actual rate of finance felt
-

company
ERC
-1¥ loom

}
RE
¥2s 50M
Iko few ACC
PSC
¥350M
Debt ÷< 2am
⑦ Kd netof
= cost
of Debt Interest
→
Tax
④IhkedmabkDI
Kd=-→g Deotkeakitna
Paisa humane
Paas
aayahaio
I = Interest, 1- = tax rate
,
ICI t)= Interest
-

Net
@ Tax
NP= Net proceeds = Face -
Discount - cost associated
with issue
value +Premium
( Flotation/ conviction)
etc .

I I

E- BIT 1000 1000

)→ clean that
-
Int o 200
EBT 1000 soo Interest Saves
-
Tax boy
•
300 -240

5@2coCl-30.D
7@
=L (1-003)=20×007
=
@
 Amounthah
accumulate Katmavptim
② Reedmalde Deft Kitna
extra
→

(Ru¥p_) haitaakihum pahkanpaaye

you
.
,

"* ICI t)
-

+
value ,

fromAmount
dagefundsulsed
Debt's

¥ # ¥ §§
Leftwing Rv -420

Kd= 1011-30:D +
(Q0§→
C÷→
Kd=
7,1¥ too =
✗
 ③ YTM ( yield to
Maturity) Approach
calculates the actual rate at which
company
→ It

feels due to Deft .

Epact

NP-RV-I.CI
step
-
t) =

N =

&tep② Statement of NPV

Particulates year Amt At ☒ % At 4%
Pvfactaee Amt Pvfactole Amt

Net Proceeds 0 (Np) 1 (NP) 1- (NP)

Intel -

t) 1-An IG t)
-
ur ✓ - ✓

Redemptionvalue n Rv - - m ✓

If NPH -10 increase rate find

is ,
we
, NPH
If NPV ✗ is -0 , we decrease rate, find NPVY
Note : we need 1 Positive MPU R
HPV
1-
Negative
Step ③

foggge.gg#PveDiffgrateo9IRR
MM ¥¥
= +

±
Yeh aesa rathe hota hai Isispale NP
,

aajatahai
Debenture kine ke
Yani exactly
feel horahe hai
 ⑦
Kpaecsstafprefshares
① Ieekemafle Pref Shares
PD= Pref Dividend

ke deinableprefdho e skp-P.E ?Y?#J

②

③ YTMApproaI_
step④
¥15
N =

PD =
II

¥+48 ) be Same Kdietm

will as
 Concept of present value
0 10

2=1,9000 "
I-1.co/@
I
-
-
it's woutnismuchless
purr g-
-
-

'

= today .CO )

Pati )n= A
)n=Éu
+

Prate Interest Ka
→ Bhoot
letahne
Diff:#
ng
Rafogmulaea
FV{¥"
PV=

(Pv factor
Statement fshpresent Value
Paeeliaelales year Pvfaitoh ②Amt Pv ① ✗ ②

outflow 0
¥1T ✓
-

E
I
Inflow - -

2 _
-

3 I
✓

¥8
B-a0_
If the company issues Debentures
of face value
while
2- too healers 2--96 Pes debenture
each
,

the debentures are leeedemable after 12feaks

at a premium of 12% Calculate
Kd,ta✗=_
⑨
If Debentures are Ihhlndenable .

② If Debentures are heedeniable

② try YTM approach

Ici -
D= 2=104-50:D
Goe ,
12years

I 99
10 :( Debentures
Rv 2=112
=

NP =
£-9b

⑨ Ieoeemable Debt Kd
Ipt=l0§Y
=

5.21%2
go-go
=

⑥ Reachable Debt ICH

Kd
)*(Rnv)
=

Kd=
=
-4*3--6.080%-4
 pvfactu
②YTM-_

Statement of NPV
Paeehiulaus Year Amount At 5.x At 10%

IPVPU-factak-P.net
@ 6)
Proceeds ⑨ 6)0 96 I I

Interest 1-12 5 80863 443156.814 34.07

Redemption value 12 112 0.557 6%38400319350728

NPV 10.899

At5% YTMIIRR At10%

}
NPV=0
+ 10.699 -26.202

IRRRY-im-doweee-dog.qggrantepYPV-xbifffrat.es
rate

5%+10.699--1 (10%-51)
(10-699)-(-26%02)
5%+1
;÷;÷✗5% 6AsY"
Kd=6•Y5n
 New Topic
ke= Cost
of Equity
¥netuen on Equity is notfired Lo , ,

can will have multiple formulae

we
say Kee ,

from Different Point of view

.

① Dividend Price Model ② tanning Price model

☒ A-
Ke=DµPps_s e=EµpP§-
=

PIErato
±
Dividend yield Eating yield
( Gondor)
③ Dividend Growth Model

*⑧
Po
D,=DfT
Ke=☒_ +
8
Po pays4eeasPaid=⑤→¥EQ
:÷÷÷÷÷÷fng÷¥wiuPay-
Poi Cam Dividend Price =
✗✗ ✗
 '
E,= Epsatend
⑨ of 1styear
Model
Earning Growth
Ke = E
, ✗
kotg Ei=EoGtg)#
Po

5550 CAPM ( capital Asset Pricing Model)

£ EATERY
⑤ Crisrpree
Retcon )
↳( F- Rm -

RD
4

)
Risk
Cretan
Expected
-

inmarket frefaee
-

Jokhim Sehneki → Risk premium

Kannagi → Riskfactor of company
a

He =
Rg + BCERM RD -

✓Thorium
Expected Return
in market
 B =
BRISK factor oh Beta .

Sehaeeemaupet Pointof view)

( from
* B foe whole magnet (Average) =L

* company A
Company B

Beta =
2 Beta =3

moheñsky
kyanite 'B Toyda risky
'
*

hai
isliye Shareholders
issersayda earning Ki
eemmedlagayage .
 'm)
⑥ Realised yield Approach ÉÉ
€ -1
1st years
when each
years share when
only
Price and Dividends Price and last years
opening
are known
closing Price is given .

¥É¥s ¥
Po B-
*
Step① Apply Realised
yield Approach ape
YTM Approach
each yeah check I 23
Rio R2 # Ry ✗ R5

Steps Calculate Geometric

Mean

Gm=④+RDGtRDGtRDa+RDCHRg-)*TF_M
checkQ__22-
Realised
yield Approach (dingle Year) *gig,

#e=DipJCR-P 1-1
100 120
 Note on How to Lowe ¢i☒)¥ ,

✗
Step ① Type
f symbol
'

Step ② Press 12 Times

step ③ Huttract 1 =

Step ④ Divide n =

Step ⑤ Add 1- =

⑥
' ' '

Step Press
'

✗ ✗ =

12Times
Need Topic Klee =
Cost
of Retained tanning

I-%a1.ie
→
←
Peeesonaltax a
-

-
r

RE
-

fyrfatimcsst
method
Khe = Ke G- tp) ( 1-B)
☒
Fearsome Brokerage
Tax

Yani Agaee company neweeuityleaisekakegs.to

•

Brokerage Pay rkahegi

shareholder dividend Personal tax
•

Agon legatoh
Pay Kouga ,
so ,
effectively Play
RE Kale
dene Pale dono ka Nutt Saam hai .

isliyehum Heh heh Iapte hat Retained

,
Ki
Evening
rakha faydemand hat, is
life kueKKI
hotahai .
Method

Ke=µ¥sµtagg¥ &
+

I
N@EE
Kae=
µDpÉgmm st+&
Metnod_ If Question does not have

ft¥n cost ✗ riot Personal Tax

then
-ke=ke#
Newton wACC= No = overall Csstaf Capital
*
¥
weighted Adage cost

of capital .

Type ① WACC
By Book value weights
→ when we calculate WACC Balance sheet
aspen
values .

weights nikattehue
( ::::÷÷::÷÷
(Awashak &uchna→ balance

Nahi hai Ki Ae , Kp ,
Kel reliyebhi

Statement aspen book values

⑦ Rates③ wA¥⑨
Sauces Book values
weights
Equity ⑧ ¥1m we ke
=
Esc r

✓
Retained Ealniy Koe
RE ⑨
YQ-ta-w.se
Rpsc
✓
Psc ②
¥ae=wp KP
✓
Debt
¥ae=wd Kd
y 1¥
 Type NACC by mapet value weights
I> yaani hum weights kicakulationreliye Maigretvalue
use
kahenge
.

Statement for WACC Cmv weights)

doubts Amount weight @ NACC

ESC MUE We ke
ESC
f
=
✓

Equity@ B. vsralio
RE ↳ RE
=
MORE Wre Khe ✓

Psc
B•¥Y%§§Mqfn;= Mvp ✓
wp Kp
Debt
Booyyauga.fi#ueog-apYgeaaaau--MVDWdKd
✓

1¥
Hume
honalhaiye Ki SAE Ki afiekafsni
Pata
Koi MV nahihoti ki RE
kyunpni Companies ,

Maeepetrnei buy auk Sell nahiho Sakti .

Equity Ki MU Mei → two

components hotehai
E⑨ ✗ RED ,
dono Ki MU .

isliye hum
Equity Ki MU Ko break Kanye

ESC ki MU k RE Ki Mu Kate hai .

equal weShould not

→
If rate og ke ✗ Kee are then
break Muay Equity into two pants .
New concept
WMCC
①
→
weighted Marginal costal capital
Neue
WACCWMCC

Deo+,•ae()
WAI
ESC Cock Ke ESC love
RE 50M Kae

pscggoae Kp
Kd
¥€ae
Debt
200£

wmcc → The Average cost

of only the additional
Loaves of Finance .

② optimal capital
→
Agaee Question yes batadetahai Hii oplimalcapital
hai existing
capital ,

Toh hume Yeh hint Mil Tata hai rkifutukemei

Ahi
agar money raise Karni hai toh Same ratio
Mei Karni Hai .

It means
weights will lumain Same
CNO need to calculate
weights again and
again
 New
② Point EIGHT
Breaking Seyi
@2=05
140kg@ 2=20
enemy
optimal Haleviguts
Suji 70% o
Ghee 20%0-20
Sugar 10%

F- E-

Breaking Point =

t-xiswtgggufy-i-a-Y.gr?t-=da@
'
*

halwa tanayege
'

Yani Jaffar hum Karg .

Hum existing Suji else kaeesapetehai (@to

Lukin agar Hum Seong Se eepale halwa barrage

toheeska rate
pmehngahogakywtti
New Suji fhhahdeufe @ 2=250

Breaking Point =

leoueaofayoilalfmd
weigutafsouea
Point
pcafoital Amount hota hai
Breaking ④ change
v0
ho Tata hai
,

Tispan .
Note Shortcut for w-A.cc RWMCC_

④ = WACC =
Kex We + Kdx Wdtkpxwp

Needed
Kd → for Deep Discount Bond or

2eaocouponBorÉ
d2¥s& Q2&ofMB_
8¥ 25
years
Po= £-3750 RU=I 1,59000

3750 (1*0)*5=150,000
¥ 159000
[¥yjs-
3750 =

④
rF5=15§¥f_ = 40

1+8=40525 ,
r=15o!
 costafconveed.to/eDef/o9prefsh- aues-2- 1o0Dllbt
Newconcept:

I@
see
\ f-Years, , ,

/
-220 Shane 5.snaaex.IT
5Sh@
(Debtor try) is
If any instrument convertible,

we Should coge-rtokno-I.at end ueillisefsend

Total Amount receivable at end

① Tf Redemption value >

Priceyconvertedshakes
atend .

ArefeuRe•H?jn
we coin

② PriceofconvertedShakes
If Redemption Value <
,
we
will
ftp.eeeconveeeb#
New
chapter
capi*1alQtru¥I
kougteemfunds Pattern

we
focus on
Deciding Rahiaf Debt ✗
Equity .

✗
pref .

owe Aim is to find optimal

Ratio ESC, PSC ✗ Debt
of
* we are
finance Managers , auuhum
shareholders Kote hai,
Equity hoofadaee
ke
QQ we want to maximise ,

EP@✗MP@

Type①QwsHon_ Decide optimal capital Structure

option often option
Palliates Elcock
Diggy Elcock
Pgm Elcock ;D 50k
Psiocr
Existing capital
New capital
E-BIT ✓ ✓
✓

-
Int old -
- -

New
EBT ✓ ✓ ✓
-
Tat -
- -

✓
EAT ✓
✓
-

pref Div Io -
-
-

EAES ✓ ✓ ✓
f- No
of Equity shares ÷ + ÷

-
EDS ✓ ✓

✗ PIE ratio ✗ PIE ✗ ME ✗PIE

 MPS ✓ ✓ ✓

to select with
we wish
option
←EP&✗tAigheeeMPs_
→ In case between EPI ✗ Mps
of conflict ,

we select case on basis

of total high
CEPS -1 MPS)
Existing xleeofunds
( E- 200W
Note8 sock

:
-
→

E- BIT 40th
Existing =

Agate Question Mei hume New EBIT Nahi di

hui ho toh hum ROI Y

%=EcB¥→ko=2⑦
,

calculate E-BIT
step ① Existing
&tdp_② Now Calculate Total Need
EBIT = Total capital ✗ ROI
50¥
=
250M ✗ 20%

Laughdate Bano , Knud new E- BIT

mikalni Seekho .
 PIE Ratio
Notes
=¥¥
EpS✗P1ERah'o=MPs#
Note •
100 Basis Point =
1%
•
Common Stock -_
Equity shakes
Interestrate
•

Coupon Nate -_ .
 Question Type ② Indifference Point .

Is .

# No level of EB_ Trispale Dono cases Ka EPI

foliolate
aayega
.

Step
EPs , =EPSz
CEBIT -
Ii) (1--1-7 PD, -
=CEBIT -

Ia) ( t t)
- -

☒Dz
Nl N2
we will put all values and get valueof EBI

E-BIT =

Indifference Point
Step To find In
diff Level EPs

we will put value of EBIT ( Indiffheoel) in

of the Side above
any one .

diff
ۃnItPD , = EPS , = In

EPS__=
Level
Type③ Question

FinancialBE1#
Is
of
Neo Level EBIT
Tristan EPS=0 ayega . .

yaanisabhi Financial Fcpaytnofsayengio

Financial BEP =
Int +
Prefix
d- E)

y?¥§f Indiffheoel
Taha
I
EBIT

Pan two Casesmée

Financial BEP
debate BIT
SahaPale EPs -0
EPS Equal ayega .

haga
option option
Equity tool Equity __ 202
101 Debt lool

Financial BEP =
102 FinancialBEP=0
Indiff Point E-BIT =
BOI
Indiff Level EPs __
2=5.
 e

Eps option
option
Indiff 2--5 -
••
diff point
In

develops

☐ • • •
>
10L 30L EBIT
ofinaucial
BEP financial Indiff Level
BEP
⑧ ⑦
EBIT

anispaeeplothongekyaupi
'
→
Financial BEP → X'
hotihae '
inn points paleEPs O' .

Decision's E- BIT K 30L → selection option ⑦

At EB -1-7=30 L Point ⑦ oh
Indiff
If EB IT 730L → Select option ⑦
 Newtype
uncounted EPs =
UEPS_
*
it
It is same as EPs
, but while calculatingReserve
we haveto subtract Debenture Redemption ,
reserve contribution
sinking fund also .

U EPs =
⇐ BIT -
Int) ( 1- t) -
P☒ -

Sinking fuel
⑦ RR ]
Contribution
Number
of Equity shares

common Sense Ki baat -

[ ]
Agate aapre Paas Kisi et case mei Debentures
hi Mahi hai toh DRR toni less case Mei
mi
hogan
¥-1 uncommitted → free Pada hua Paisa .

Jaani poise Gale

commitment
Risi fbi Tanah Ki Aoi
bashed to
payment na .
 Chapter 6
Leverages
①
Leverage → Risk
→ when a
company cesesfined-sources.to
earn more

more bish → More

gain .

Income Statement
Particulates Amount
Gates v

Less Vaeeialde cost

contribution ✓
unavoidable
Less fined cost c- > → operating fined cost
E-BIT ✗✗✗

Less Interest (→

EBT
Less Tax (→ financial fired cost
EAT
hers
prefDividend (→
EAES (
tanningavailableto Eguityfhahes)
Number
ofEquityshakes
E
 Before Tax Vs Attell Tax

Concept *

:|
BMT" Asterix
Amount G-t)

¥? ?
= =
Amount
2eb30%=→#
⇐ 2=1 (1-34)=-2-70
2=10 (1-0.3)--2=70

!÷÷⇐☐go
Gnbpt⑦_

Preftoiuidend Mehsus Fitna Amount hum Pay Kaktehai

,

loose
Tayda hota hai,
Kyunlti Prefix
ke band wale Amount de
tax pay Kahne

payhotahai .

Effective Burden
gAfDiv=BYDg¥④
_Ta✗3É 4

sogou.ae?g-:o-Fn# toooo

2=1*0-02
Concept deoeeeage

operating develop financial Leverage Combined Leverage

The east
of The
leeway cost Tneeeisttafaee
operating Firedcost financialfixed fired cost.

Salaryfined

EN-eeostaprysggDCKDOLXDFIDOL-C-ntEMD.TL
)
Rent,
(nature
,

expenses

__E_ÉDCL=Gnt_
EBIT
EBIT-T-nt-treft.si#EBIT-InT-TYfYY-
÷÷a÷¥¥%ny%FL=EB
=m)%ñ exchange insoles EBt-%FF-DEL-qchaegi
Dfi=-Éw!÷eÉ¥¥
✗ .g g#s-n@
EB-ITEBIT-T-nt-frefIFY-exanple-EBIT-5.co/000
DFL __

_Int-1,a,O0OI-
DFt-s.co?owIFE-ygog-.o-,-Tax3oy---l,2o,000-
EBT

EAT
__

=
nooooo

2,89000

_¥£¥=ñ:÷-

E☐=%÷sg÷¥→=¥¥÷a
A
:#%
B.

(
Cont = 10L cont 10L
Fe=É FC
EBI EBI-=8#_

D0L=¥=④ Do -_

¥-1.250
Conception concept of ROI vs ROE

EBIT Xxx capitalemployed -_

hogteemfunds-_

Investment
_Int#
EBT xxx
CEEDF Psc Debt

¥¥¥-×
_prym
EA ES

-_tTi•|RoE=_EA%a
ROI
Capital employed ESHF

conopt④_
Asset Turnover Ratio = Labs
Assets

considered better
Higher is .

GnCept_PlvRaho=GnI%¥on_xi@
P1vRaho+VaeeiableGstRatio=1oo
 Concept VI# Total Liabilities __ Total Assets

BB_

Tota¥s -
÷€Assets

Concept Breakeven Point

overall or combined
Financial BEPP
operating BEP or Total BEP
→ what Should be the Kitni EBIT Loni WhatShould be the
Level
of Sales do, that
chaiyekikamsekamhumdwelafsalesso.tn at
EBI-1=0, means
Intxpreftsiv able
Chuka Safe , Weave to
pay
business will be able CEPS =D allouleaotpeha-l.mg Fc

to meet its what Level of EBIT ,

✗
financing FC .

operating FC -

wieltselfuspoy owe
Giannis financial FC and Cinuw "
"
combined BEP

opeaaltvgBEP-FC-leaveHEPS.contp.tl "

, FiFI¥f==Ñ-B&?y¥ =c+=nt+i
.
Contribution Poll

poypiv-G.in#)oee.0PLaEGp--pFI.oCin2-
opeeeaeingBEP-c-n-f-uxsp.in

line '

→yeh0penaliugManaga
Nazauiyahai
DOL
-_%cheyinE_IT
i. min sales

1. 11 ÉT 1.25
-__¥EBIT
=

g
10%4

12.5.FI/inEBI-#ConceptIO-
1H%=%HinEBI-#

favorable financial Leverage

If ROI > Intonate

Yani agate er business Investmentpay say da earn

Kale
Naha hai, ante Interest Kam Kaeeleahahai,
Pay
toh risse favorable financial Leverage Kehtehai .

[ RT-nte.ae?)
Rot >
rate
20%

concept
DOL
mots
=

Degree of operating beverage

-_mogeTy
* BEP %-1 Mos % =
100%
Ñpt✗_ Few
formulas from Ratio chapter

Fanning yield =

tm M•
Dividend yield --Dm→g✗ko

Rat Sales
Capital Tunnel
'0=¥em|mfed→
 Risk Analysis in capital Budgeting

MetÉydS_#
¥0

{ densnuityA-nalys.es
④ Risk adjusted ⑧
①
Probability
②
③
/
Variance SD
Coeffieutof
Discount rate
⑤ certainty Equivalent ⑦7SIenaeÉtnayn•
Variance

&t☒calMetnod# ConuenHmalMetnod#OthekMetnodI
method
Situation
Probability ,
cash flows
se
metnodIOSD-o-M.gl?0qdY-Qg-0V
probability
f
f-n
A a 0° I 001 a
B to 03 036
C a 0.5 0.5C
D d 0.1cL

8-2 Ian
-1€
.az valet and

① Expectedvalue of n= Mean __
Average-_ñ= ECX) -
Expectation

sign
=

② variance =
scx-n-f.ly
Standard deviation =ÑÉ=VÉÉf- on
③ Coefficient

afuaeeiation-standmagadnbeuiation-oq.NO
te é Decision criteria
to select Project with higher NPU
we
try
.

But
If /
MPU is not given Caeuleelatable or is
/ equal .

Then we select project

having
LowekC# (lower volatility)
Gowen SDIbfff.hn#Highek Stability
Method
•
① Risk Adjusted Discount Rate
•

Discountrate =
expected earning rate
If we use Risk free rate as a discounting factor
,

it means we are not

adjusting risk factor in
discount rates .

If we want to
factor in capital
adjust eeisk
Budgeting by using Risk adjusted Discount rate ,

we use
discount rate
Rgi-Riskfrem.ie# as a

example -3 Q5gfMB#
Method ⑤ Certainty Equivalent
Uncertain
Situation A
Certainty Certain Cash
Inflows *
Equivalent
=

Yeah coefficient flows

Cfacted)
1

::::a
08

:}
✗ =
too
2 I
0.7
flows
cash
=
✗
so
3 80 ✗ 0-6 =

0075
for further
×
4 140 =

5 / 180 ✗ 0-85 =
Calculations

uncertain ✗ Certainty = Certain cash

cash
flows Equivalent flows
factor
Cor Coefficient
Coe Number]
Method ⑥
Sensing Analysis
In this
analysis we make
changesFacade
in
.

Casually
NPV .
adverse
charge) toknow its impact on

try
we to know
eeehichfactote
NPH 's
will have .

maximum .

influence on
change .

% NPV end NPV-aleiginalNPV.io/co

change
original Npv )
=

Note : Adverse change

for / /
dates units, Sale Price cash inflow → Reduction .

for v4 / cost/ Discounting orate

Fc → Increase

Note : Question Mei

Agar Sensitivity Analysis Ke ,

%afoedueusef-nagivenho.tohhumloy.edu#T
hume
Kanye assume Question
Kale dete hat
Method -⑦ Scenario Analysis

f)
Best 8L D.a

Pvco CEDI →Most Port .

7hPa
↳↳ ↳ worst 3hPa

loY⑨
Scenario
In
Analysis Question
,

we will have vaeeious Scenarios like

Best
Probable
worst etc ÷

Do
,
we will have to Solve Lepeeeatelyfoee each case .

Yani Lum alagatoy Scenario ke liye alag alg

-

NPV
nikalnge .

Ho Lokta Lai alagfbialong

-

scenario ke within
include Kaede to
question probability make
each Scenario case
longer .

Referall
019 MB
PS
 Dividend Decisions

Growth rate = to ✗ T

± →
⑨ Rate of Rehan

Rdn ⑨ Return on Investment

•

ratio @ Return on capitalemployed

*

EPS Meise Kitwe :/ Amount Retain

Company
Ramleh hair
'

Qhaeeehol②
f-

deh-gy.Gpfis#BE@-20IK*R0I--2o@
Invest

•①

8€

CneInp0sesty.edxR0Trateg-bxIDi@oDYnYY.d
Groom =

Hayat
' '

'
sE¥
Retention
ratio
+
Payoutratio = too:/

ft Payoutraho =
look

_Payoutnatio=l-#
 ⑤
ioiFd ④
→
tEdefdp
1-
shout
-0¥ Docks) =
⑤
Di =

E!(t
Di = LEE
,
✗
Payout ratio
in
④
=
E

*•*"°"→→*=⇐¥#
µµ
Ñ
Ttispasefok
Approach
founded
(Ke-*D=Dp_¥
Pocket D=

Po=D¥
DMR
_ Dividend
Dividend is Relevant Dividend is irrelevant

feevalueaf Company /Shakes ftivalueaf Company/Shakes

MM
Approach
① Goledon'S Model
nssuwpx.ms → Read from Book Page -96
Ke=¥+9I

*÷ •=÷oc÷÷";÷÷
, do,
Valery company remains Same
even
if you Ey_Di¥ndokn

→Po=D¥¥#n%
Po=Dg¥¥#@
y :÷E÷::÷:}
Ke<r# Payo :/
want to do
Dividend

DOG -18)
Gordon's model →
⑤
Dividend Growth Model opeeeiod Ipeeeiod

Ke=Dp→ Shake Price

#
Today __p④
 MMAptn.ro#

walteismodd-capii.ae Total

Value
=
Total
capital
value
Before after
Pñaaf =D *
CE←¥¥r
Inane N ✗ Po =
fnton )R -
I+ E
F- ① + Ke)
PCE-D.ro
=
D 1- n=
oleiginal Number of Equity Shares
µeKe__ on

Po =
-_
Change in number of Equity shares
Price of Shake at beginning Cato period
'

P, = Price of Shane atendafyeau # '

.

I = Amount leepuileedfsle Investment

ke > R → too:/ Dividend
Payout E- =
Earnings in this period
( o:( retention
Ke < R 0% Dividend Payout
Cleo:/ retention
ke=R Do whatever
you
want to do

w@ Realised yield Approach

me

Fp)
-
- '

Po -④
 D, __ £8

Po=Elco P, -- 2=120

Ke=§I¥)
-
1

Ke = 8+120--1
too

Ke= 1.28-1 =
0128 -

d⑧

•Newconapt_• →
TraditionalM#\
① £raham✗DoddModd_
P =
m
@ ;-) +

② Linter's model

P =
Do +
¢E3et) D) ¥8 -
✗

Adjustment
Do CD
)×Ag
+ Do
☒
-

,
factor
Cspeedaftely effect
(Bhaangka
 _ÉIae_,
No Growth Constant Growth Vaeeialde9rooMQ

P•=µ☒¥gG+ Manyisiffgrowtnrales
are
given

Gi Gi 9£ 92
-
gjheoeh
- - - - -

1 2 3 y

t.FI#..--......
Py=1¥g
' '
- '
- -

,
,
-
, .
, -
 Statement for estimation of Intrinsic value CPD
year Pufacloeeit Amount pv④✗⑨
¥5m
I DDOCHGD PIPPI,
¥=o:909
=
✓

I D (1+8) Dz
¥z-_
0^826 ,
= -

3
¥50751 D2 (1+82) =
Ds -

4 ¥y=0£ Dz (1+92) =
Dy ✓
-

y
Py=Dy¥§?-
-
- -

±→t+÷→
N°
8ham is overpriced → sell this shore

① Ifeeooontpnceaf -2g Intrinsic value

Shake of Shake
Shane is under Priced →
Buy this share
②
Ifceoaeutpñuaf
Shake
€6k Intrinsic value
of snare
WCM
-Ñ cash budget
Noted ① Prepared for future ( estimates are used)
② It uses estimates and not actual
figures .

③ It Shows cheoenue and capital nature

both transactions -

⑨ If cash will be /
heaved Paid In the
said period it will be shown , even if
the cash belongs to Some other period .

⑤ If
J
we have to maintain Some closing balance
we can do it by
Invest
SheepIus amount in Shoutteem
Investment .

In case
of deficit we prefer selling snout
teem Investment otherwise sheet teem
,

farrowing
⑥ Depreciation/ Amortization or other Non
cash expenses are to be ignored in cash

budget
 format for cash
Budget
Particulates Month1 Month2 Month.3

opening Balance ← 20,000 20,000

Receipts
Cash Gales ✓

Collection from Debtors ✓

Saucy Asset ✓

/
Issue of Debentures snakes / Taken Loan ✓

Dividend / Int behind ✓

Miscellaneous eceaipts ✓

Total cash available ③

Payments
•
Cash Puevhates ✓
✓
to creditors
Payment
•

• Dividend Paid/ Int Paid ✓

•
/
overheads Paid / Exp Paid Salay Paid ✓
•
Income Tax Paid ✓
•
Pueichaseagrsset ✓
•

Redemption of Debt / Loan / Prefsh .

I
•
Miscellaneous Payment

Total Payments ⑨
Closing cash ① ⑨ -
48000 4000 2000
Less Investments made temp) (280003
Add Sale of Investment -1+16000--11122000
Add shout teens
Billowing -1+6000

cash 20,000 20,000 20,000

Net
closing
To
factoring
New concept →
FactoeeingT-formatfoedoluh.com
credit Sales = ✗☒✗

⑨
§÷
Debtors = xxx ✗ =
Debtors -_

Less commission =
⑨✗
R,ate_a =
②[T
Less Reserves =
⑤ ✗ YR = ⑦

Amount Joe Advance =

④ -
② -
⑤==⑦

Less Intereston Advance ⑤irate E- !

Net Amount
of Advance Available =
⑨

Statement showing evaluation

of factoring Proposal
Benefits in Admin cost
collection
Savings in ✗ ✓

Bad Debt #
Shavings
✓

Interest Saved due to reduction of ACP .

cosi-gsaeesxq.at?n--#-eID ✓

Total Benefit ④
 Costs
commission to factor (Annual)
④✗
33¥
✓

( Anneal)
Interest
=✗3§g_ ✓

Total
costly factoring ⑨

Net Benefit ④ ⑨-
see Netcsst ④ or -0

Cased we have met Benefit →

Accept factoring
case ② If we have Net cost -0
then calculate effective Interest on Adelante
Amount eeeceiued .

Effective rate = ①
Netcostaffactoeeiy xvo=✗
Net Advance Amount

If ✗ % > market Int rate . Reject

factoring
If ✗% 4 Maupet Int rate , Accept
factoring
r¥f¥⑦ operating cycle

Trader
Manufacturer
cash → cash
g)
I ]gµ
Ddht← Stock y*Ñ← WIP

which
operating cycle→ The time period deeming
is used released
cash
before being .

in business cycle .

Statement for operating cycle

I I
RM holding = Average stocky RM
Period RM Consumed Per day

• RWIP Convention
period = Bullate Stock of WIP
Costof production Peeeday
•
FG holding = Average stock of FG
Period Costafgaodssoldpegday
• Debtors " Average Deflates
CollectionPeriod credit sales Peeeday
 /
Less creditors Average auditor
Payment Peuiod
-_

coaditpuuchasespeeeday
operating cycle Period ☒ days

metnod⑦_ operating cycle

particulates Days

|+
•
RM
holding
Period =
doStockogRM ✗300 +
RM Consumed
•
WIP Conuestion
Peeeid dvelafe WIP
✗360 +
=

cost of production
• F- Gholding
Period =
donate Stomp -5-9×360
•t•••••
• Debtors
Collection Period __
tvelafe Debtors ✗zoo 1-
credit sales

t.es#taees--PaymeutPeeeiod--Avdafeoeeditwesp3oo(-
Credit Purchase

• Adoanato -1
supplier
operating cycle Period ☒ day
① Number
of operating cycles in a
year
.

Number
of days in a
year = 360093652
operating cycle Period ☒ days

② Estimation
of WC
using operating cycle
weeping Cash operating
capital Expinayeah ✗ operating
=

3. Go see 365
cycle
or

working capital Expinayeaee

Cash operating
=

Number
of operating cyuesinayear
Ñ"_opicN°# Estimation of weeping capital
Total basis
Type① on
for existing company
an ,

TyPe② on Total basis for anew

company .

Type③ cash cost basis for an

on existing company
Type⑨ on cash Csstbatis for a new
company .
 Estimation of weeping capital
Paeeticulaees Amounts)
Current Assets

Stock afrm RM Consumed *

÷¥ggµz-
= ✓

✓
④
Stock
of WIP = material ✗ Ico:c
:D ¥-152112
✗
Latourette ✗50
*
factory cost z¥É5 ✗
✓

Stookey F9= Costal Production

✗z¥¥gµ
Debtors Ceeeditsalesx AveragecollectionPeriod
= -

360/365/52/12
Advance tosuppliek
casts
I
p Bank

current Asset or gross working capital ④

ceeeouuthiak.lt#oeeditohs--RMPwechasedx Aveeafepaymentfeeedod ✓

365/300/1552112
01s wages/
¥-1 7%1*1-12
✓
=
✗
01s Expenses

Total current Liabilities ⑨ ②

Excess of CA over CL ⑦ ③ -

✗
+ Safety margin /Contingency Reserve
Con e. age]
I
I ⑧
Networking capital
N°⇐
Total Basis vs cash cost Basis

|
Iss method Mei hum Iss method Mei
→ Non cashexp (Dep) hum → Non cash Exp (Def)
Ko profit
←→
Profit ggyghut ✗→ Ko
Mei Rehnedetehai hata dete hai ,
awe

when we compute fir casn-csst-fas.is

working capital fate we calculate
-
Kahtehai .

(Def ×]
Cash cost Basis
> Stock of WIP
> Stock 9*9 ( Depp
impacts •

> Debtors Ctsefx , profited

→
auestion is Silent, we
prefer Cashatt
Basis .
Notte Maximum Permissible Bank Finance CMPBF)
Tandon Committee)
ccpsy
Method Method t method _
•

for goodcustomers medium customer

for Bad customers
moeeeloass → Medium Loan less loan .

CA * too CA FICO CA 2- Ico

C2 2--20 -2251 -2--25 core CA 2-2=-20
Margin
-
-

2=80 other CA ISO

we
Remaining @A 2--75
251 2=20 C2 2=20 Less 25:/ 2--20
Margin Margin
-
-
.

Ito MPBF £55 60

MPBF
Remaining CA
=
-_

-
CL -20

MPBFI
Note's E-xiszersvsmew.com/oany-
Question Question

→
Agar ek business Here
already existing hai toh ,
opF9=opwIP=opRM=0
hum yen assume Kaeete But
closing stocks may
Gai Ki opening closing not the hero, so
=
,

we have to make
Stock Stock
long
%
opening gets cancelled fh_mat csstsneet
neitn
closing
Assumption cost sheet
OPRM ARM
= Particulates Amt
of WIP =-D WIP RM Purchased
of Fa =UF4 top RM 0

-
ARM Ccascalwlatedbyus -

8. we make Shohtfoemat Rm consumed ✓

Costsneet +
wages
Prime cost

rmea.me?fYp?Y#+fau-aayaone
Gross factory cost ✓

+ of WIP 0
I wIp(ascaeudatedteyus)
✓
Labour - -

°¥✓ factory cost ✓

Quality
✓ ¥ R&D primary Pack

t%of# Costas production

+ op -1-9
✓

0
-

a Fg (ascaeweated§ -

Note : we
prefer this
costaggoodssoed
+ Admin General

É+•¥É#
-
Neurotic Debtor
Management
⑦

t-nmeatingp-E.FI/-en&T--s--
Libhealising audit Policy →

① Increased sales ① Bad Debt Inmate

Increased Contribution ② Interest lost due to
Increased Profit Debt Period
longer
.

③ Increase in collection Exp

Cbeliauency cost

Note : Question can be Solved in

Total Approach see
Incremental Approach
 ⑦ Total Approach
sntatementof Decision making

|||
paeeeiudalees Bessent
proposal proposal
30¥ EoDays_ goDays_
credit Sales ✓ -

Less valuable cost - -

-

Finned cost
-
- -

Bad Debtor Collection Exp - -

-

cash Discount Cif any]

- -

Expected profit ✗ ✗ ✗

↳ a
, given,
- - -

•
④ Expected profit after Tax * *

⑥
opportunity cost of Investment

Deftoe scost_Inteaestrae x@Qal9Is.x ,

in

-
- n

VCTFD
_É⑦É

Select Positive Net Benefit

Highest
N① we prefer Interest on Debtors Gs④
(not sale Wahl)
Note:_② If Tc is not possible , we calculate
Interest on Vaeeiafle cost -

Not_③ If Question doesn't have Tax-rate , then

we used Expected profit before Tax ⑦
& Interest is also calculated on
pretaxsate
 Method
Incremental Approach

WI present Policy I Policy I

Amount A B C

Incremental Amt d- A) G-A)

Statementfor evaluation
Paeetiaelaees
@credit Policy
pretext policy I Policy -1-1

Incremental Sales B- A c- A

Less IncrementalVC ✓ ✓

Less Incremental FC
✓
-

Less Incremental Badbebt Collection

weep /
✓

Less Incremental Cash Discount -

✓

*
Incremental Expected Profit *
Lets Tax e) C- ]
⑦ Incremental Expected profit afteetax * *

Present
costafsales n - -

✗ ACP /360 ✗ $93b ✗

693A ✗ 90/360
☒ ☒ e
Cost
@ Debtors
Incremental csstaftsebtaees @ A)-
(c- A)
✗ Rataofnt xr or

⑨ Incremental Int Costafiseftdescost * *

Net Benefit ⑦ ⑨ -
✓ ✓
 Capital Budgeting
It

Longterm Decisions
forfuture

,c,cooeage_→
Modeled
?%¥n"o÷¥yDiscounting •
Discounted
¥0 #⑧DiscountedPBP
Payback period
✓Ñ And dfretuen
→
Accounting rate *
g⑤ Npv
** ***

↳
svdagerateLeeuen ✓
③ Payback Reciprocal ⑧ NPUInde×

*⑦PI
•⑧*MIRR
⑨ IRR
Concept '
-meValuegMoney 5years
today
'

10
2=1,0000 I1,co,oo
¢ñscÉ Calculation of PV utalena
Interest ka foots

hairy
ka Mahalo

(
Discounting
Pat Ñ= A Ki hum
future ke cash
ko ki
p# CHER
ows aaj
= v present value Paeelelfak
aanahe had , foe
PU =

FV✗¥g,
fettle decision making
-
 conaptafCFAT_%=Ñmaeeomoe]
ARR
Wease PAT foe
concepts
method

xxx

Tani hum Dep Kofi sirf

saving tfeliye

÷÷÷*r:÷÷÷:÷
tax Kale

¥£ rrahehai .

Depreciation ⑧→
EB 'T
_-a✗- isiiye gets actually cash ko
EAT .

Exp naan Kale hum tax

"÷.

qodmetngdae XXX
-
Vc e)

> Depreciation ✗ Taxoate

PBT✗D ✓

w
-
Tax
Yani humnetsepupaee
ansir-napan.AT add
+
snauingag
Tax due
taxsauing directly
Kandi .

"

cFA
ggmyg.gg/g,, gg.-
case case

PBTXD 2,9000 PBTLD 2,04000

Delp

%¥¥;:§÷ñ¥¥"i÷:÷
- -
59000
PBT 450,000

+
Taking
onDlp -115,000
1-
Dep 50,000 (50,000×301)
 ? Considered
"

.kai0d¥Eaaeg"
Nontsieeounted
Metnod⑦_ Payback
→

± better

Iss method mei hum yen Dephtehai Kiso paisa ,

Initial /Subsegment capital) business rneilogayahai , V0

kitnesamaymeivapasaasataohai.jp?PT-,
Études wbenunqnalcasnfiowse

|
en
Initial Investment 2=1100,000
PB" """ ""ted ""•→
inflow Gagan)
Eash CCFAT Cummulaliue CFAT
Yeah
I 40,000 40,000
pBP=tTYla€ & 30,000 70,000
3 20,000 90,000A
PBP =
3.6 years -4 yo ,
ooo
1,3900°
5 40,000
PBP=3yeaus -10.6×12
/
6 30,000
Monty

PBP= 3.years 7- Months

f- ]
Investment

Capponi) PBP= Completed + cummulatiue cashflow

Years upto completedyears

years -1 Cleo -9010003

PBP =3 ooo
, TÉtae
40,000
=
3.255years

3. years # 005×12 M .

3yeaus3M#t-
Method
Discounted PBI
→ we use discounted cash flows and not
undiscovered cash flows .

*
Initial Investment __
-21,01000
CFAT 1st
Yo 40,000
22dg 30,000 Discounting rate -40%
Bodge 20,000

PVfactoh-zf.FI#-o.p-n--!--ng-tnyr
Utnyee Uaooo
40,000
Gaylor Discounted
30,000

c.EE?gO&ol--yearsPvFactwe
cFAT②
00909
①
Amount PV Cummulaliuepv
7- 40,000 36,360 36,300
2 00826 30,000 24,780 61,140
of 00751 15,020 76,180*8
20,000
4 00683 46,000 103480
5 00621 40,000 24,840
6 0564 30,000 16,920

Discounted
PBP =3
years + G,agoo0-76,l#
27320
= 3.873 years

1- 3.
years -100873012m
=3yeaksIr↳
3.
years to months
3%Ñae①
0.478630
loments
methods Net present value
statement NPV
for 10%

!: ÷=
* " "
outflow
Initial Investment ✗✗✗ 0 I 10L 10L
-

Subsidy = 012 -110.90s x @☒

-

Snaleafold Asset 011 -

Y ⇐

weeping capital of ✓
✓
✓
Subsequent cashflow i 3 -

Present value
@ casts outflow PVCOAO

IÑM FAT Ctnnual Inflow) I 0909

I
2 088 If

4 0683

Scrap Sealeaf Asset 5 0.621 - ✓

we realised 5 00621 - ✓

Present nalaeofcosb Follow pvCI⑨

Net present value -_
PVCI Poco
-
=
⑨ ④
-

Decisive
HPV 30 , Accept project
HPV < 0
, Reject proposal
 Today
'
'
° 5
4

I
1 3

1 , I •
" CFA-13 CFATY
I CFATI
(-1-2%4%102) CFATJ

1- Scrap value
working
Capitals) looking capital
ReasHeed③

Note : we
always assumethat
working capital
amount is returned at full value at
endg project
 Cpoojectmei
)
'
1- E- Pale kitni
'

→
method ⑥ NPVInde✗_ earning aayihai

NPV Index
=NP÷g
=

PV§!V
NPV Index 20 Accept
Decision criteria →
If ,

→
If NPV Index < 0 , Reject

money we get from Project

on an
Meaning → How much
Investment of E1_ In Project

metnodt-o.PI-frofitability-s-ndlx.ee
Desieeatilitytndex
'
¥1
Yani lagarnaee Kitna Canibus aaya
Cnot Profit
How much
inflow cash
are we
getting on

investing 2¥ in a project

PI-P.LI#Decisonoeite eia-tfPI Z1
PI < I
Accept Project
Repeat project
Methods MIRR → Modified Internal Rate of Return
murmur

1 's ¥
'
! L u

-⑤
Initial
⑤ ⑤ ④ ⑤

I €÷L÷÷÷÷.÷¥÷÷-
✓

Ini¥
swat
-

MIRR
MIRR → Rate at which terminal
can be discounted to get
Inflow
Initial
Investment
Method IRR → Internal rate
of eaten
V0 actual rate , giispaeeiss
→
project me earn Kiya
Lai .

→
yaniyehvoaslirate-haiijis.se
nahi hui hai
Jayda_ ya Kane
earning
.

iss rate
pan NPV=# aoayegi

At 10:/rate At 121 rate

particulates Year Amt Pvfactar Pv Pufaete Pv
outflow 0
CoD 1 Gold
= In
Inflow & I 0=9-09
0.820
I
Z
-

3 ✓ 0+751 ✓

9,875€50
u ✓

10%
IRR 12%
}
+5000 NP¥ -10,000
IRR =

doggy +
Lowekratextoiffgoates
NPV
Biffy MPV
= 10%-1 5000 ✗@Y-1
5000 -
C- 101000)

10%+5000×152%-0
I☒R Io6

i¥-" 154
*
NPV -18000 -12000 -
¥000

nEi¥pougpaa€
 NPUIndl✗<

@;;ifD
PI -

I =

%¥→ 1-
-

A B C

NPV £40,000 2=80,000 2=1,00000

"%?÷° ¥%÷•
""

§¥÷:÷
6¥ ¥g
Index

£25T
 No
Return
method ARR →
Accounting Rate ofReturn
Rate
or Average of
.

only This method in Investment Decision

Which Uses PAI and not CAF

_p¥b^
PBTXD ✓

+oep+_
*

ARR can be calculated with various

types
-

① _yPe①-

µ ]
ARR =
Average PAT Question does
Initial Investment not
Saysanything
then Solve

"t②ARR by these two

afreeggg.LI#men+metn0dh
=

AveeafePAT=PAT,-PA-z-__-PAÉ
Numoaagyeaus
 -_(*dgcs#pval§
Terminal
Average Investment Investment
+ Investment

Type# If we have opening -4 closing

aType⑨
Investment value
of each year
the we calculate ARR for each year
separately and then
these ARR
calculate
Average of

(
Algy
Yani Pennie have year ki
Along
-

ARR nikalo auk

fir,
Uh ARR Ki Avenge nipalo .

woinf Initial Investment

ARR canoe Caeulated→ or
↳ Average Investment④

* check out example ⑦from module

pHqpÉÑ-b¥up*
¥1:¥m¥ &Yñ⑧

↳ Type ① ✗ Type@ ARR

pµ,pµ,pµ,pµypg
10h 22L 1L

µ
6L 3L
Asset
I 1 I

↳
Type ③ ✗Type ④
 Concept No -
③

Independent Proposal Proposal

→
when Two proposals Sandefer
not related to
are
each other ,
€7
④ @ ⑨
Selection
of one • where
only @ can
proposal has no be Selected .

impact on other proposal ,

•

Agar Kisi en ko
Select Kiyatoh Dressa
It
maybe possible to
proposal automatically

y
.

select mere than Reieethoteayega

one proposal Npv
Higher
-
→

Decision criteria is selected

Select whichever proposals
have ⑦ NPV .
 Conception

Money Saved is money Earned

e-FFgaefru.si question Mei aeesa Raha Hai Ki
Matekial cost
,

New Machine Buy .

Kahne Se
annually 2=1,9000 Save to Jaggi .

→ Toh
aap iss Question Mei

RevenI/SaleI(Infeoo Ri value Ko
2=1ag00I_ Increase Rahloge ,

Gani Money Saved Ko Money Earned maanye .

enamtll②_
one machine New Machine

existing-ofeeatinopxtcostEQaaoooP.cn
'
Cost 2=120,000 Aa
→
- -

-1980,000 Money Saved

- -

*
Treated as Revenue/ Sales/Inflow in
Question .
Con6ptNote⑤_
Money which could not be eahned is
money expended
Yani agau Koi income aapkaksaltte the , leptin aapne
Mahi earn Rani , iska Matlab
aafne utna
Amount Expense Randiya ( Kho diya ) yaani ,

hum auditors mei loose outflow maanege .

examine
spoutedyou
Now
will setup
¥
>

125089 feet New machine

* here
rented
previously
⑥ 2=3/59 feet .

'
→
opportunity
cost
-

2=3*507
- -

we will consider -237,500 as an

expense
di
is amount Ro Mei
Yami hum Inflows
Se
expense ri Tanah Subtract Kaheye .
Conapt☒⑥ Absorbed 01K are irrelevant
there is actual charge in cost
→
if no

→ we should
ignore absoubedolt-f.se
decision
making of a new project .

Yani Jo Kohancha pehle Ghi ho Naha than

at Ahi ultra hi hi Naha hai, toh new
project consider
Nani
ki Decision
making meieesse
Kanna chaiye →
Ieoulevantcostn
example z→→ Absorbed 0111
AS Absorbed
office expenses
 Conception capitalgain/ Capital Loss
Calculating N②teem#IrgoI
Purchase Price £1,09000
Capital
-_

§¥e="
Installation Cost 50,000
Total Cost = 2=1,59000
-

DeBRt05 20,000×5
wDVatendg5= 2=50,000
÷
IT
SPC WDV sP= WDV SP > WDV
80,000 750,000
40,000 450,000 Sale = WDV
59000 50,000 Capitalgain -_ 30,000
Capitalboss __
10,000
N°Gain/N0loss_
-
Tax 40% =

Taxsrauinflqoooxyoy
-_68③
.

=4o casninpow
Cash
inflow --50 80,000

Casninflow --4Y! -1rad

40,000
-140°F

Cosninepowatendcsakafotsset
Snalevalue at end xxx
-

Tax on CG ⇐

+Ta✗&auingon
NAndÉ
 NewT

Capital Rationing
when have limited capital but have
we , we
many
Positive have to
HPV
projects ,
then we do capital
Rationing ,
which means
investing money
in those

projects which provides us with maximum

evening .

Types
of Questions
* *

Divisible projects Indivisible Project

Step① Calculate NPV step① Calculate NPV
step② Calculate PPI step ② Calculate PI and
PI to RTE
→
Now Rank
acbeedingto .

Now hank
according
steps Start
investing funds
onwards
from Mank1 Steps make various combinations
.

step④ If at end
apropos al
try to use high rank projects
cannot be Invested /
purchased * calculate Total NPV .

we will invest
Competely
in it should
proportional capital we
Try to use
.

Manimum funds and

obviously we ,
willget
Mani mise NPV
only proportional any
that
project .
Stop④ Select combination
which provides maximum

?¥v×¥%%?I%¥→_
*
Npv = Total HPV .

earned
regained in
project .
MUltiple-projects-clnest-ionconceptNOSO.CI#geI
uneeualdifeprojects.it
? B A B
sighs 5yas 5yeam gyeaus
i. It ,agooo
MPV £59000
NPV £50,000 tfgooo
These alee Non comparable on
Decision -3 Select
option Total basis
neitnhigheeexpv → we will have to divide
by cummulaltuepvfactoee
of Life
and find
er
EquivaleutAnnualNPV@0MachineAfswechakd3yeaasago.a
as

Sycosis
Total useful Lifeof
DNPV
A
50,000
B
1900,000
Machine B has 3- + cumulative :- 3.7908 i. 50759
years
°

-3
useful Life
>
am%GÑiÉ
0
ii 145 Npv
¥
=
,

Page# -5gal
.
- - -
-
,

tÉF &eketB☐
detect Equivalent
⑨ syean Hipaa
Annu#P#
 Aleatoric

NPV-IRRCof.cl#
ho
Agar NPV Kisi awe project Ka
Higher ,

ho,
awe IRR Kisi awe project Ki
Higher
tohisse IRR hat
Npv -

Longuet kente

"" IRR
ProjectA too,ooo 27%
project B 80,000 31%

Reasons for Npv conflict

IRR
-

① Diff in timing of cash flows of two projects .

② Diff in volume
of cash flows of two projects
.

③ Diff in Reinvestment rate assumption .

→ Npv assumes that reinvestment hate is

K' Costal capital)
'

→ ueheauas IRR assumes aheinvestment date is

-

RCIRR)

%ELEF¥nF%witn Higher NPU .

Because
① Reinvestment hate assumption of NPV
is more realistic in txpv than _tR@
② IRR is not useful foe Nonconventional
cashflow projects ( multiple outflows
 Subsidy
Capital Nature Subsidy
Treatment

aessuos.us/Ef::??.II,-
/ /
Paeetiulaees PV
machine 0 I 2.ooo, ooo
Costal ☒

If subsidy is If subsidy is

ftp.ef stn-scrop-J/Ddp- Cost- suosndy-scrcfaue -)

_ae taxable
 NWTupeagaues.li#CusedinQoo )
auesHonwnichhasonYoutflooS__
Paeetiudaas ya Pufa Amt Pv

outflows
purchase of Machine 0 1 in
~

Expenses ( 1- t) 1-5 £321 10,00

Led Tax Saving on Depreciation 1-55-321 ~ C- )

(Depamtxtax rate)

PUCO ⑧⑧

Sales 1×0,001000

IOL-VIT ECY.ae/0 0PBTXD6caqo o-pzY-a:F

-Tax3oY-1fqoo0_ -3£
 Incremental Concept
Jab Question hum Lab Kuch Incremental
Mei
Yani
basis pale nikalte hat .

Incremental →
change New value
value
Existingvalue
-

oee New
Existing value
-
.

This concept is used , when we have an

asset which isalready working decently ,

but we have an
option to replace it
with a new version
of Asset .

* Issmethod mei hum Snabpuech Incremental

show Koht Mai NPV ki statement Mei .

off
Cost New machine
① of loco ooo
,

800,00
-

Saleaf old Machine -2*00

② CFAT
ofNew machine 3421,0W
-

CFAT of old Machine -1,21=0 3,0000

③ Scrap sale of old Machinecatered) 40000

-0-49000
-

Scrap Saleafold Machine Catend)

EqualtifeQwsHoÉMethod Can be used in

This only
Eton Depreciation
-0¥ IIe -0€ É
Inflows Inflows onlyoutfreros-Depi.to
teechaeged
Sales Sales
xxx
Vc
xxx
outflows ✗
- - -
in
first
ve -
-

Lesstaxsauing yeah
-

-p¥f☐ →pB on
Depreciation itself
ñ:±÷

I¥E→c¥f¥
→k÷
pjyc-s-t-axsaeiqonsep.INT#-e)1Ja-..H
u
t
presentation presentational

t⑧°
&" " " ""
CFAT
✓
calculating
PBT✗D ✓ ✓

Deploy Csep ) ✗ ✗
Tapetsepstaxsauing
PBAT separately .as igloo
( V) d ✓

Tax so:c ✗ tax __A⑧

Taxsrauie +
valueafisef rate

#
+

PAT CD ✓ ✓

top + Dep ✗ ✗
snooasinfeuo
CFAT ✓ ✓ ✓