Financial Framework for Business Decisions Trimester I (Full Time)

Date of Examination: January 15, 2010 Duration of Examination: 3 Hrs. Maximum marks: 60

INSTRUCTIONS TO CANDIDATE This is a closed book examination. Q1 is Compulsory Attempt any four from the remaining questions State clearly wherever any assumption is made/required Marks for each question are mentioned in parenthesis. Neat and systematic presentation is expected. Q1 Compulsory Q.1 Prepare the Cash Flow Statement segregating the Cash from Operations , Investments and Financing to explain the change in the Current Account Balance for the year 2009. 1st April -31st March A-Ltd All figures Rs.lakhs 2009 2009 A. Sources of Funds 1 Shareholders Funds a) Share Capital b) Reserves and Surplus 2 Loan Funds a) Secured Loans b) Unsecured Loans B. Application Of Funds 1 Fixed Assets a) Gross Block less Depreciation Net Block Capital Work in Progress 2 3 Investments Current Assets ,loans and Advances a) Inventories b) Sundry Debtors c) Current Account Balance d) Other Current Assets e) Loans and Advances LESS Current Liabilities and Provisions a) Liabilities b) Provisions Net Current Assets a) Miscellaneous expenditure to the extent not written off or adjusted. Total 524 889 3160 645 723 3008 7062 1600 5462 650 989 4563 1179 3384 746 454 2308 1906 11301 1724 1905 8442 5200 1887 3250 1563 2008 Sales Material Consumed Wages/Salaries Manf: Exp COGS(Total) General Exp EBDIT Depreciation Operating Profit Other Income PBIT Interest PBT Tax PAT Equity Dividend 13124 7613 2042 924 10579 1296 1249 421 828 102 930 298 632 226 406 82 2008 10982 6154 1894 812 8860 1123 999 334 665 78 743 176 567 384 183 54

1663 1966 -165 542 567

1910 1061 144 585 676

1040 11301

850 8442 (12 Marks)

Attempt any four from Q2 Q6 Q.2 A ltd whose financials are shown in Q.1 is a large steel manufacturing unit with an authorised capital of Rs 8000 crores of face value Rs.100 each. The company has listed its shares at both the NSE and BSE and the market to book ratio for the year 2009 was averaging about four. The companys operations were continuous throughout the year barring five days which was utilised for routine plant maintenance. The capacity of the plant was 900,000 tonnes per annum and its utilized capacity was about 80%. Most of the costs incurred by the firm were fixed barring material consumed and labour. With this information estimate the following for the year 2009. The Price Earning Multiple The Contribution earned per tonne The operating leverage The EBDIT interest coverage ratio The Break even point The Debt Ratio The Net Working Capital to Sales ratio The Retention Ratio The operating Cycle Cash from Sales (12 Marks) Q.3 Rupees/Mn Units Sales Material Imported Domestic Labour Skilled Unskilled Overheads Total Cost 8,700 2,600 8 3 78,000 69,600 7,800 78,000 220,996 8,500 2,800 85,000 6 4 51,000 11,200 85,000 217,884 13,308 1,242 2,392 22 16 27,324 38,272 1,312 2,542 19 18 24,928 45,756 7,312 Budget Price 32 233,984 Units 6,422 Actuals Price 36 231,192

a) b) c) d) e) f) g) h) i) j)

Profit 12,988 Notes : Sales and Material Units is in Kgs and labour in hours With the available information in the Table perform a profit variance analysis

(12 Marks)

Q.4 Particulars Sales Production Av: Selling Price Variable Manufacturing Cost Variable Selling Cost Fixed Manufacturing Cost Fixed Selling Cost Budgeted Capacity June 1500 1100 32 9 4 9600 5800 1200 May 1200 1400 32 9 4 9600 5800 Per unit Per unit Per unit April 900 1200 Units Units

The monthly production and sales information are provided for a company. The company currently considers Direct Costing in valuing its cost of production. The company is seeking your advise in adopting an alternate method and would want you to prepare the Income statement : a) Under the Direct Costing b) Under the method you would suggest as an alternative c) Provide an explanation for the profit or loss differences if any under both the methods (12 Marks)

Q.5 Rs '000 Asset Value Life Salvage Value Profit Before Depreciation Expected Growth Rate of Profits Tax Rate 120000 5 22000 42000 2% 40% Years

The company has installed an asset whose initial value and the salvage value is given in the Table. They are seeking your opinion of the different depreciation accounting methods they could consider. The company has been informed by their accountant that three methods namely the Straight line , The written down value and the sum-of-the-year digits can be considered. Your brief is to: a) Estimate the year 1 and the year 5 depreciation under the three methods b) Estimate the impact on the reported taxes of the company for both the years c) Your advise to the company as to the choice of the method to be adopted (12 Marks) Q.6 Software Solutions Ltd Particulars Time Taken per person Accountants Wages Paid per hour Variable Overheads Fixed overheads Capital Invested ROIC (Post Tax ) Tax Rate Inventory 20 3 160 60 486,320 12,722,132 5% 40% Receivables 32 4 180 60 Hours Persons Rs/Hour Rs /person hours Rupees Rupees

Software Solutions is intending to commence a financial services outsourcing firm an intends to quote Rs 588 per person hour for the Inventory management outsourcing and Rs 812 pe person hour for the Receivables management outsourcing: a) Estimate the Break even person hours for the company b) If the company expects a minimum 5% post tax return on the invested capital what should the target breakeven ? (12 Marks)