Paper /Subject Code: 44808/ Financial Analysis and Business Valuation 16114 2u

Time Duration: 2 ½hours Marks: 75

Instructions:
Allquestions are compulsory.
Figures to the right indicate full marks.
Working notes should form part of your answer.
Use of simple calculator is allowed.

Q.1 A) Select the correct option and rewrite the sentences (Any 8).
(08)
1. Dividend received is
a) Cash inflow from Operating Activities
b) Cash outflow from Operating Activities
c) Cash inflow from investment Activities
d) Cash outflow from financial Activities

2. EBIT is Rs. 360000, Equity shareholders Funds is Rs. 2000000 and Debt Funds are
Rs. 1000000 then ROI will be
a) 8.33%
b) 10%
c) 12%
d) 15%
3. is the discounted rate of return at which aggregate Present value of inflows =
Aggregate Present value of outflows
a) Average Rate of Return
b) Internal Rate of Return
c) Accounting Rate of Return
d) Normal Rate of Return

4. NP Ltd. has capital of 30,000 and Net Profit after Tax (NPAT) is Rs. 54,00.000. It's
share of Rs. 100 each, is currently traded at Rs. 540. The P/B ratio of NP Ltd. Willbe
a) 30
b) 5.4
c) 180
d) 100

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 Paper / Subject Code: 44808 / Financial Analvsis and Business Valuation

5. Average Capital Employed is Rs. 450000 and NRR is 10% then Normal Profit will be ks.
a) 4500000
b) 50000
c) 45000
d) 45%

6. Financial Statenment Module Areas is/are

a) Only Cash Flow Statement
b) Cash Flow Statement and Income
c) Income Statement and Balance sheet
Statement
d) All Income Statement, Balance sheet and Cash Flow
Statement
7. Value of Share under Fair Value method is Rs. 30 and under vield value method is Rs. 29. What will
be Value of Share under intrinsic Value method?
a) Rs. 1
b) Rs. 59
c) Rs. 31
d) Rs. 59

8 is Excess of aggregate Present value of Cash inflows over aggregate Present value oI
Cash outflows
a) Present Value
b) Net Present Value
c) Future Value
d) Net Future Value

9. Retuns on Equity Shareholder's Funds is Ratio.

a) Liquidity
b) Activity
c) Profitability
d) Leverage

10. is an estimate of the earnings capitalised value of the asset assuming that the
earnings will grow at a stable rate from thereon
a) Terminal Value.
b) Equity value
c) Economic Value
d) Business Value
Q.1 B) State whether the Following statements are True / False (Any 7)
(07)
a) Goodwill is an Intangible Asset which does not have realisable value.
b) Sustainable earning is also known as persistent earning.
c) Asset based approach of business valuation considers Liquidation value as well as book value
method.
d) Redemption of Preference Shares is a Cash inflow from investment Activities.
e) A firm can increase its profitability without any growth or expansion of business.
f) Economic Analysis requires information about Investment, Production and employment etc...
g) Current Ratio is an example of Composite Ratio.
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 Paper /Subject Code: 44808 /Financial Analysis and Business Valuation

b) NormmalRate of Return of Returm is average retum expected by shareholders from their investment.
i) YieldValue of Shares is also called as Market Value Method of Shares
j) Super Profit is Excess of Future Maintainable Profit over Normal Profit.
Q.2 A) Following are the lncomeStatements of ABC Ltd. for the year ended 31st March 2021 & 2022.
Prepare aComparative Income Statement of ABC Ltd. in vertical form and analyse the changes in Sales,
Gross Profit and Net Profit. (08)
Particulars 2021 2022
(Rs.) (Rs..)
Sales 10,00,000 12,00,000
Cost of Goods Sold 6,00,000, 7,20,000
Gross Profit 4,00,000 4,80,000
Operating Expenses 2,00,000 3,00,000
Operating Profit 1,00,000 1,80,000
Non-operating Income 20,000 60,000
Non-Operating Expenses Nil 20,000
Net Profit Before Tax 1,20,000 2.20,000
Provision for Tax 30% 30%
AND

Q.2 B)From the following information of QPLid, prepare Common Size Balance Sheet in Vertical Form
as on 3lst March 2022. (07)
Particulars Rs.
Fixed Assets 5,00,000
Current Assets 3,00,000
investments 1,00,000
Share Capital 4,00,000
Reserves & Surplus 1,00,000
Loan Funds 2,00,000
Current Liabilities 2,00,000

OR

0.2 M/S. LM and Bros. is considering an investment proposal worth. Rs. 100 lakhs. The expected, interest
rate is 10%. The following information nhas been provided to you. You are required to evaluate the project
using: a) NPV b) Profitability Index and c) Payback Period. (15)
Year Cash Flow (Rs.) Discounting Factor@ 10%
20,00,000 0.909
2 25.00.000 0..826
3 27,50,000 0.751
4 37,50,000 0.683
32,50,000 0.621
6 25,00,000 0.564

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Paper /Subject Code: 44808 / Financial Analysis and Business Valuation

Q.3 From the following Trading and Profit &Loss a/c of OR Ltd. you are required to compute the follou:
ratios:
a)Gross Profit Ratio b)Net Profit Ratio c) Operating Ratio
d) Operating Expenses Ratio e) Stock Turnover Ratio f)Office Expenses Ratio
Dr Trading and Profit & Loss a/c for year ended 31/3/2022 Cr (15)
Particulars Amount(Rs.) Particulars Amount (Rs.)
To Opening Stock 1050000 By Sales
To Purchases
525000 Gross 28,00,000
To Factory Power 2500000
To Carriage Inward 11000 Less; Returns 3,00,000
To Wages 25000 By Closing Stock 375000
ToOffice Salaries 200000 By royalties 25000
ToOffice Rent 25000 By Income from Investments 25000
To Office Electricity 10000 By Commission 15000
15000
To Depreciation on Furniture
12500
To Printing &
Stationery
To Travelling expenses of 30000
To Depreciation on Salesmen 15000
Delivery
ToInsurance on Delivery VanVan 2500
ToAdvertisement 2500
ToGeneral expenses 7000
2500
To Postage
2000
To Audit Fees
5000
ToProvision for Tax
To Net Profit 500000
500000
2940000
2940000
(Preparation of Vertical statement is not necessary)
OR
Q.3 From the following Financial
the year ended 31st March 2022: statement you are required to prepare cash flow statement of Doc ltd. for
Balance Sheet as on 31st March 2022 (15)
Liabilities 2021 2022 Assets 2021 2022
Rs. Rs.
Rs. Rs.
Share Capital 3,50,000 3,50,000 plant & Machinery
Secured Loan 2,50,000 4,55,000
-

2,00,000 Inventory 75,000 2,00,000

Profit & Lass
Alc 35,000 50,000 Debtors 25,000 1,00,000
Creditors 70,000 1,95,000 Cash 1,00,000 45,000
Tax Payable 5,000 15,000 Preliminary Expenses 10,000 10,000
4,60,000 8,10,000
4,60,000 8,10,000
Revenue Statement for the year ended 31st March 2022
Particulars Rs. Particulars Rs.
To Opening Inventory 75,000 By Sales
To Purchases
5,00,000
4,90,000 By Closing Inventory 2,00,000
ToGross Profit cld 1,35,000
7,00,000 7,00,000

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 the fol owi
Paper /Subject Code: 44808 / Financial Analysis and Business Valuation
o General Expenses 55.000 By Gross profit b/d 1,35.000

(15) Fo Depreciation
To Provision for Tax
40,000
20,000
To Net Profit c/d 20,000
1,35,000 1,35,000
To Dividend Paid 5,000 By Balance b/d 35,000
To Balance c/d 50,000 By Net Profit b/d 20,000
55,000 55,000

0.4 A)The following figures have been extracted from the records of a company: (08)
Year 2021 2022
Sales(Rs.) 6,00,00,000 7,3 1,25,000
Units Sold 1,00,000 1,12,500
Selling Price 600 650

Account for changes in sales value due to changes in sales volume, selling price and both
AND

Q.4 BÊMr KK wants to sellhis residential property located in Lonawala. Following is the information
available of a similar property of Mr BB: (07)

Particulars Property of Mr KK Property of Mr BB

Area 600 sqft 800 sqft
Sales Value(Rs.) 88,40,000
Additional expenses incurred on property for
renovation(Rs.) 6,50,000
Value of Furmiture included along with
property(Rs.) 4,50,000
Further, the value of property has generally appreciated by 8% since the sale of property by Mr BB.
Calculate the value of residential property of Mr KK.
OR

Q.4 The balance sheet of XYZ Co. Ltd. disclosed the following position as on 31st March 2022. (15)
Liabilities Rs. Assets Rs.
Share Capital (6,000 6,00,000 Goodwill 1,65,000
Equity shares of Rs. 100
each)
Profit & Loss Ac 75,000 Investments 5,25,000
General Reserve 2,25,000 Stock 6,60,000
6% Debentures 4,50,000 Sundry Debtors 3,90,000
Sundry Creditors 1,50,000 Cash at Bank 60,000
Other Current Liabilities 3,00,000
18,00,000 18,00,000
i) The profits for the past five years were: 2017 -Rs. 30,000; 2018 - Rs. 70,000; 2019- Rs. 50,000;
2020 - Rs. 55,000 and 2021- Rs. 95,000.
ii) The market value of investments was Rs. 3,30,000.
iii) Goodwill is tobe valued at three years purchase of the average annual profits for the last five
yeaRs. Find the intrinsic value of each share.
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 Valuation
FinancialAnalvsis and Business
Paper/ Subject Code: 44808 /

(08)
variousstakeholders.
Q.5A) xplain the importance of Financial Statements to
(07)
Q.5 B)What are the importance of valuation of fixed assets?
OR
(15)
Q.5Write Short Notes on the following (Any 3)
a) Uses of Financial Modelling
b) Sustainable Earning
c) Super Profit Method of Valuation of Goodwill
d) Valuation Bias
e) Cash Flow from Investing Activities

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 busin ess vaiuauon
raper/ uDject Coae: 448UÜ / FInancial Analysis ana
TYtP
21|2819
(Total Marks: 75 )
(2% Hours)
N.B.: (1) Allquestion are compulsory.
(2) Use Simple calculator is allowed.
1.A Match The Column (Any 8) : (08)
A Column B Column
1) Financial Modeling A) Financing Activity
2) Gross Profit Ratio B) Rights out of own creation
One Time Contract
3) Higher Current Ratio C)
4) Highly Liquid Securities D) Discounted Cash Flow
5) Wind fall gains E) Computer based Mathematical
Model
6) Income Approach F) Trading Efficiency
7) Yield Value G) Cash Equivalent
8) Copyrights H) Overtrading
9) Buyback of shares I) Pre-conceived notions
10) Valuation Bias J) Based on FMP
K) Under trading

1.B True or False (any 7) : (07)

1) EPS shows managerial efficiency in use of resources.
2) Issue of Bonus shares affects the cash flow from financing activities.
3) Cyclical earnings are not included to calculate sustainable earnings.
4) Efficient market hypothesis has no shortcomings.
5) Fair value is average of intrinsic value and market value.
6 Software is an example of intangible assets
7) Prepaid Expenses are included in liquid assets
8) Common size statement is a horizontal analysis.
9) Cash flow statements is mandatory for all firms.
10) Business valuation must be free from speculations.

2. A Dailymoon Ltd. is considering a purchase ofa machine, A & B are the two machine (15)
available. From the following information, suggest which of the two is
recommended under Net Present Value:
Particulars Machine A Machine B
Cost of machine 8,00,000 10,80,000
Life 5 Years 6Years
Profit After Tax (PAT)
Year 1 28,000 30,000
28,000 60,000
3 80,000 80,000
4 90,000 80,000
45,000 40,000
6 20,000
Cost of capital is to be considered as 10%.
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 raper /supject Loae: 44508 /rnancaAnalys1s ana Business Varualon ra

OR
2. B From the
following balance sheet of Sunrise Ltd. as on 31-03-2018 and 31-03-2019, (15)
prepare cash flow statement for the year ended 31-03-2019 as per A.S 3by indirect
method :
Liabilities 2018 2019 Assets 2018 2019
Equity share 45,00,000 52,50,000 Land 15,00,000 11,50,000
capital
General reserve 3,00,000 5,00,000 Machinery 13,50,000 28,70,000
Capital reserve 3,00,000| Investment 9,00,000 7,00,000
Profit and loss
alc 3,00,000 8,50,000 Stock 14,00,000 16,00,000
|Screditors
undry 6,00,000 9,00,000 Debtors 9,00,000 13,50,000
Provision for 5,00,000 5,50,000 Bills
tax 2,45,000 2,90,000
Proposed receivable
dividend 3,95,000 Cash/Bank 3,00,000 3,90,000
Total 65,95,000 83,50,000
1.
Additionalinformation: Total 65,95,000 83,50,000
During the year machinery was sold for Rs. 2,
2. During the year 00,000 (WDV Rs.
3. Profit on sale ondepreciation provided on machinery was Rs. 2,25,000).
4. Interim land was transferred to
capital reserve.
3,00,000.
dividend
5. Profit on sales of paid during the year was Rs, 2,00,000.
6. Income tax paid investment was transferred to general reserve.
during the year 2019 is
7. Proposed
Dividend for the year 2019 Rs.Rs.4,50,000.
4,50,000.
3. A The following are the
accounting reports prepared for Reliable Ltd.
Profit and Loss Alc (15)
For the year ended 31st
Particulars March 2019
Rs.
ToOpening Inyentory Particulars Rs.
To Purchases 2,00,000 By Sales (all credit)
4,10,000 By Closing 6,00,000
To Gross Profit c/d
1,50,000 inventory 1,60,000
7,.60,000
To Office & Admin Exp
50,000 By Gross Profit b/d 7.60,000
To Selling &Dist Exp 40,000 1,50,000
To Financial Exp 24,000
To Provision For
16,000
Taxation
To Net Profit
20,000
Total 1,50,000 Total 1,50,000

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 r'aper / SuDject COde: 44ÖUð / FInancial Anarys1s ana Busin ess valuaion

Balance Sheet as on 315 March 2019

Liabilities Rs Assets Rs

Equity Share Capital 1,60,000 Plant &Machinery 30,000

Reserves &Surplus 60,000 Building 1,30,000
Profit & Loss A/c 30,000 nventories 1,60,000
Loan on Mortgage 50,000 Trade Receivables 1,20,000
Trade Payables 1,74.000 Cash&Bank Balance 60,000
Provision for Taxation 16,000
Other Current Liabilities 10,000
Total 5,00,000 Total 5,00,000
Name and Calculate the ratios which indicate:
a) The Rapidity with which accounts receivable are collected.
b) The ability of company to meet its current obligations.
c) What profitability on capital invested has been attained.
d) The efficiency with which funds represented by inventories are being
utilized & managed.
e) The ability of the company to meet quickly demands for payments of
amounts due.
f) The Relative importance of Proprietorship and liabilities as source of funds.
As a financial consultant you are asked to write comments on above ratios.
OR
3. B Financial position of Bluestar Itd. as on 31t March: (08)
Liabilities 2017 2018 Assets 2017 2018
Equity Share 2,00,000 2,50,000 Building 3,00,000 3,20,000
Capital
10% pref. share 2,00,000| 1,50,000 Machinery 1,50,000 1,80,000
capital
Reserve fund 80,000 1,00,000 Furniture 40,000 35,000
Profit and loss 1,00,000 1,50,000 Investment 1,00,0001,50,000
account
12% debentures 2,00,000 3,00,000 Stock 1,50,000 2,00,000
Creditors 1,00,000 1,20,000| Debtors 1,00,000 1,20,000
Bank overdraft 50,000 20,000 Bank balance 90,000 85,000
From the above information of Bluestar ltd. as at 31S March 2017 and 2018 you are
required to prepare comparative statement, after rearranging in suitable form for
analysis.
3.C Following information is extracted from the records of MG Ltd. For the year ended (07)
31s March
Particulars 2018 2019
Sales 9,00,000 16,20,000
Cost of goods sold 6,00,000 10,80,000
Sales volume (units) 60,000 90,000
Account for changes in profit due to changes in volume, cost and selling price.

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 raper/ SunieCr o9ns
Valuauon
inancaLAnauysIs anasusiness
Taper Subject COde: 44808/

(15)
4.A The Balance sheet of Angel Ltd is as follows
Balance sheet as on 31s March 2019
Rs.
Liabilities Rs. Assets
30,000
Equity share capital 3,00,000Goodwill
1,90,000
Capital Reserve 60,000 Land & Building
1,20,000
Profit & Loss A/c 26,000 Machinery
1,15,000
Trade Payables 1,26,000 Inventories
95,000
Other Current 45,000 Trade Receivable
Liabilities
Cash & Bank Balance 7,000
Total 5,57,000 Total5,57,000
This Company's business is to be purchased by Maria Itd. You are required to value
the Goodwill of the company, after taking into account the following information:
1. The Reasonable Return on capital employed is 12 %for the company.
for
Z. The Company'saverage profit of thelast 5years after making Provision
tax at 50% amounted to Rs. 95,000
3. The Present Market value of Land &Building is Rs. 2,20,000
4. The other assets are to be taken at their book values.
5. The Directors of Angel limited (two in numbers) are to be appointed on the
Board of Directors of Maria Ltd. The worth of their services is (and will be
paid in future), Rs. 10,000 p.a. for each Directors, but no change has been
made, regarding this, against the profits of Angel Ltd.
6. The Goodwill of Angel Ltd. Is to be taken at four years purchase of super
profits of the company.
OR
4.B Answer the Following
1]Explain The different methods of valuating goodwill (08)
2] What is Growth analysis and explain its features (07)

5.A Explain What are the purpose of Business valuation. (08)

5.B What are the essential characteristics of Investment? (07)

OR
5.C Short Notes (Any 3) : (15)
1]Financial Modeling
2]Cash Flow from financing activities
3] Valuation of Real Estate
4] Inventory Turnover Ratio
5] P/B Ratio

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