BITS Pilani

presentation
BITS Pilani Dr.Sonia Antil
Pilani Campus Department of Eco & Fin
 Q.1 Cash Flow
Q1) Dutt Company’s Statement of Profit and Loss for the year
ending June 30, 2022 and Relevant Statement of Sources and
Application of Funds as on June 3030, 2022 given below: Relevant Statement of Sources and Application of funds on June
30 are as follows

Particulars 2021 2022

Statement of Profit and Loss Amount in Rs.
Inventories 9300 7900
Sales 75,800
Trade receivables 6600 5300
Gain on sale of investment 1200
Prepaid expenses 1100 800
Interest income 900
Trade payables 12600 19300
Dividend income 300
Total Income 78,200
Expenses
Cost of goods sold 45,000

Depreciation expense 6700 Selling and administrative expenses

include bad debts expense of
Selling and administrative
8,500
expenses
1500

Loss on sale of Equipment 800

Total expenses 61,000

Profit before tax 17,200 You are required to compute the cash flow from the operating
activities for the year ended 30th June 2022.
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Sol. OCF
Cash Flow from Operating Activities Rs.
Profit before income tax 17,200
Adjustments
+Depreciation 6700
+Bad debts expense 1500
-Gain on Sale of investment 1200
-interest income 900
-Dividend income 300
+Loss on sale of plant & Machinery 800

Operating profit before working capital change 23,800

Change in WC
Increase in inventories -1400
increase in trade receivables -1300
increase in prepaid expenses -300
Decrease in trade payables -6700
Cash generated from operations 14100
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Q.2 CVP

Compute the Selling price, BEP in units in the following question (Total Marks= 8)

(a) A company proposes to introduce new product the market. It would like to
maintain P/V Ratio@ 25%. If the VC of the product is per unit is Rs.300/-
what should be the selling price? (Marks – 2)
(b) ABC Ltd. sold 55000 units of its product at Rs.375/- per unit. Variable costs
are 185/- per unit. Fixed costs incurred uniformly throughout the year
amounted to Rs.61,75,000/-. You are required to compute the following:
1. Breakeven point in units
2. P/V Ratio
3. No. of units that must to sold to earn EBIT of Rs.500000/-
4. Sales level to achieve an after-tax income (PAT) of Rs.500000/- assuming a
tax rate of 50%
(Marks – 4 x 1.5 = 6)

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 Sol. a

Solution =

PV Ratio = (Sales - Variable Cost) / Sales =

0.25=(S-300)/S
Therefore S= (S-V) / PV Ratio
0.25S = S-300
S = 300/0.75= 400
0.75 S=300

S=300/0.75=400

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Sol. b
Contribution = SP – VC= 375-185 = 190
Break even sales in units = Fixed cost / Contribution per unit = 6175000/190 = 32500 units
(a) 32500

(b) P/V Ratio = Contribution per unit / SP per unit * 100 = 190/375*100 = 50.67% 0.506667

No. of units to be sold to earn EBIT of Rs.5,00,000/- =

(c )
(Fixed cost + desired EBIT) / CONTRIBUTION PER UNIT
6675000
(6175000+500000)/190 = 35132 UNITS 35131.58

(d) Sales to achieve PAT of Rs.500000/-

PAT = 500000
Tax rate 50%
PBT = 500000*100/50 = 1000000
Estimated sales = FC + Desired profit /190 = 37763 units 7175000
Sales = 14161625/- 37763.16

14161184
(6175000+1000000) / 50.67%

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 Q.2 Total Fixed cost = 2000*1000

BEP= Fied Cost/Contribution per unit

2000000

2000000/9000
Calculate the BEP of the 222.22
Contribution = Sales-VC
company and how many 32000-23000=9000
scooters should be sold to
earn the same profit If the Now the Profit earned
company reduces the Sales 32000
VC -23000
selling price of scooters by fixed Cost -2000
Rs.2000 per scooter. Profit 7000

Profit If the company reduces the selling price of

Selling Price = 32000, Fixed scooters by Rs.2000 per scooter
Cost per scooter = 2000,
Variable Cost = 23000 New Selling Price (32000-2000) 30000
Total Fixed Cost (2000*1000) 2000000
And in the given period 1000 Desired Profit 7000
scooters were sold. Tota Profit (7000*1000) 7000000
New Selling Price (32000-2000)
New Contribution (30000-23000) 7000
Sales=(FC+Desired Profit)/Contribution per unit
(2000000+7000000)/7000 1286 scooter
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Q.3
Sales Rs.200000
Profit Rs.20000
Variable Cost 70%of Sales
Calculate: PV Ratio
Fixed Cost
Sales for a Profit of Rs.20000

(1)PV Ratio (S-VC/S)*100

(200000 -140000/200000)*100
30%

(2) Contribution = Fixed Cost+Profit

60000= FC+20000
Fixed Cost 40000

(3) Sales = Fixed Cost+desired Profit/PVRatio

(40000+20000)/30%
Rs.200000

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Q.2) As an assistant manager, you have received the following Trail Balance,
Prepare Statement of Income and Expenditure and Statement of Sources
and Applications of funds of your company during the financial year
2021-22.
Particulars Debit (RS.) Credit (Rs)
Adjustments to be made are given
Net Sales 2,82,250 below:
Cash Balance 4500 1.Closing stock of Inventory as on
Purchase Return 2000 31.03.2022 valued at Rs.20,000/-
Purchase of Raw material 1,10,000 2.Create provision for bad & doubtful
debts at 5%
Sales Return 1500 3.Outstanding salaries Rs. 5,000/-,
Wages paid to workers 20,000 outstanding wages Rs. 3,000/-
Equity Capital 56,000 4.Charge depreciation @ 10% on Plant
Accounts Payable 22,000 and Machinery
Power & Fuel Expenses 8,000
Carriage outwards 6,000
Carriage inwards 5,000
Opening Stock Inventory 6,000
Land 10,000
Plant and Machinery 1,25,000
Salaries paid to administrative staff 12,000
Office expenses 6,000
Insurance Premium Paid 1,000
Accounts Receivables Outstanding 15,000
Tax paid 32,250
Total 3,62,250 3,62,250
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 For the current year Sources Rs.
Particulars
ended March 31, Net Worth (Owners’ Equity):
2022
Equity Share Capital
Income from Operations 56,000
Revenue from Operations (Sales)
282250 Add: Reserve & Surplus
75,250
Sales Return 131250
1500 Current liabilities
280750 Accounts Payable 22,000
Expenses: Outstanding Expenses
Raw material consumption
Salaries 5000
Opening Inventory 6,000
Purchases 110000 Wages 3000
Less Closing Stock 20000 161250
Less Purchase Return 2000 94,000 Applications
Wages 20,000 Fixed assets
Add: Outstanding wages 3,000 23,000
Land & Building 10,000
Fuel & Power 8,000
Carriage inwards 5,000 Gross Block:
Depreciation 12500 Plant and Machinery 125000
Gross Profit 1,38,250 Less: Depreciation 12500 112500
Office Overheads
Carriage outwards 6,000
Salaries 12,000
Add: Outstanding salaries 5,000 17000 Current Assets
Insurances 1,000 Accounts receivable 15,000
Provision for bad & doubtful debts 750 Provision for doubtful debts 750 14,250
Office expense 6,000
Closing Stock 20000
Earning Before Interest and Tax 1,07,500
Tax 32250 Cash in Hand 4500
Profit After Tax 75,250
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Q. RA
Answer the following (1 x 5 = 5 marks)

(i) If Quick ratio is 3:1, Current assets are Rs.2,80,000/-, inventory is Rs.40,000/- what is the value of
current liabilities?
(ii) If the Debt Equity ratio is 2:1, what is the impact of purchase of fixed asset by taking long term loan?
(iii) If Debtors are Rs.3,00,000/-, additional bad debts Rs.5,000/- and provision for bad debts Rs.8,000/-
what is the value of debtors considered for Debtors turnover ratio?
(iv) From the following compute the EPS and Price Earnings ratio
a. Profit after tax
Rs.1,00,000/-
b. Equity share Capital (Face value Rs.10/-) Rs.2,00,000/-
c. 10% Preference capital Rs.1,00,000/-
d. Market price per share Rs.45/-

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Sol. RA
(i) Quick Ratio 3
Quick assets (Current assets - Inventory) 240000
CL ?
240000/x = 3
x= 240000/3
Current Liabilities 80000

(ii) Increases as the long term debt increases

(iii) Debtors 300000

Less Additional bad debts 5000
Debtors considered for the ratio 295000
(Provn. For bad debts is not considered as it is only a provision)

(iv) Profit after tax 100000

Less Preference dividend 10000
Amount available to Equity holders 90000
No. of Equity shares 20000
EPS 4.5
PE ratio = Market price / EPS 10
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Q. RA

S.no Particulars Amount Q3. From the information given below calculate
1 Equity Share Capital 2,50,000 the following ratios: (Marks = 5 *x 2 = 10)

2 12% Debentures 3,00,000 (i)Operating profit ratio

9% Preference share (ii)Current Ratio
3 1,50,000
capital (iii)Gross profit ratio
4 Reserves and Surplus 50,000 (iv)Inventory Turnover ratio
Revenue from (v)Debt Equity ratio
5 5,00,000
Operations
6 Opening Inventory 40,000

7 Purchases 3,00,000

8 Wages 50,000

8 Closing Inventory 50,000

Selling and Distribution

9 10,000
expenses

10 Other Current assets 2,50,000

11 Current Liabilities 1,50,000

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Calculation of Net profit

Revenue from Operations 500000

Less:
Raw material consumed
Opening stock + Purchases - Closing inventory 290000 Current Assets
Wages 50000 Inventory 50000
340000 Other Current assets 250000
Gross Profit 160000
300000
Less: Operating expenses
Selling and distribution expenses 10,000
EBIT 1,50,000
Interest on Debentures @ 12% 36000 Average Inventory
EBT 1,14,000 (Op+Cl/2) 45000

Since there is no information on tax liability, it is assumed

that
EBT is net profit

Net profit 1,14,000

Less Preference dividend @ 9% 13500
Net profit available to Equity shareholders 1,00,500

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Q.3

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 Formula 20X2 Ratio 20X1 Ratio
Current Assets 24100 1.51 12000 1.09
Current Ratio Current Liability 16000 11000

Quick Assets 12700 0.79 6500 0.59

Quick Ratio Current Liabity 16000 11000

Receivables 5100 26.61 Days 2750 23.02 Days

Average Collectio
Period Net Sales/360 days 191.67 119.44

Inventory
Turnover Cost of Goods Sold 57000 6.75 times 32500 7.65 times
Inventories 8450 4250

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Q.4 CF

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Sol

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