Professional Documents
Culture Documents
CORPORATE FINANCE
Investment Decision - Determining the assets structure of the firm (a) Capital Budgeting (Investment in fixed assets) (b) Working Capital Management (Investment in current assets)
Financing Decision - Determining the capital structure of the firm Dividend Decision - Formulating the dividend policy of the firm
Balance Sheet
1 2 3 4
-contd.APPLICATION OF FUNDS Fixed Assets Gross Block Investment Decision Less: Depreciation (Capital Budgeting) Net Block Capital Work-in-Progress Investments Deferred Tax Assets Current Assets, Loans & Advances Inventories Sundry Debtors Cash & Bank Balances Loans & Advances Less: Current Liabilities and Provisions Current Liabillities Provisions Net Current Assets Miscellaneous Expenditure (to the extent not written off or adjusted) TOTAL
5 6 7
170,217.05 121,220.77 48,996.28 3,142.85 52,139.13 1,198.11 15,673.88 244,870.52 216,836.20 357,840.50 43,332.83 862,880.05 443,102.49 54,148.52 497,251.01 365,629.04 434,640.16
157,990.36 111,244.63 46,745.73 4,672.16 51,417.89 1,198.11 14,661.91 242,096.11 227,652.76 264,194.52 49,754.61 783,698.00 413,853.75 56,288.62 470,142.37 313,555.63 380,833.54
8 9 10 11
12 13
BHARAT ELECTRONICS LTD. Profit and Loss Account for the year ended 31st March , 2010
Schedule INCOME Sales less returns Revenue from Long Term Contracts Income from services Turnover(Gross) Less: Excise Duty Turnover(Net) Other Revenues Accretion/(Decretion) to Work-in-Progress, Finished Goods and Scrap Profit on Sale of Fixed Assets(Net) Transfer from Grants 14 15 (Rs. in Lakhs) 2009-10 2008-09 501,539.47 450,268.38 1,908.50 20,437.93 10,192.01 521,977.40 462,368.89 3,933.52 4,015.50 518,043.88 458,353.39 36,334.89 22,571.07
EXPENDITURE Consumption of Raw Materials and Components Consumption of Stores & Spares Purchase of Finished Goods Employees Remuneration and Benefits Other Expenses of Manufacturing, Admn., Selling &Distribution Interest Depreciation/Amortisation on Fixed Assets Less: Expenditure allocated to Capital Jobs Profit before Prior Period and extraordinary items Less: Exceptional Items - Expense Less: Extraordinary Items Profit for the Year Less: Prior Period Items (Net) Profit Before Tax (PBT) Less: Provision forTaxation - Current Year - Earlier Years - Deferred Taxes - Fringe Benefit Tax - Total Provision for Taxation Profit After Tax (PAT) Less: Transfer to Capital Reserve (Capital Profit) Add: Balance Brought Forward from previous year Profit available for appropriation Appropriations: Dividends: Interim Dividend Proposed Final Dividend Dividend Tax Transfer to General Reserve Balance carried to Balance Sheet
16 17 18
19
20
227,395.21 4,134.69 70,923.75 100,958.47 35,813.23 53.48 11,594.23 450,873.06 35.74 450,837.32 107,658.55 3,134.91 104,523.64 104,523.64 21.29 104,502.35 33,500.00 (72.78) (1,011.97) 32,415.25 72,087.10 90.77 177,236.84 249,233.17
236,630.71 3,886.68 63,588.24 75,579.35 37,591.91 1,076.85 10,559.77 428,913.51 37.36 428,876.15 117,432.67 7,847.47 109,585.20 109,585.20 (98.39) 109,683.59 34,727.00 419.03 (418.41) 380.00 35,107.62 74,575.97 8.73 160,172.05 234,739.29
Notes to Accounts Balance Sheet Abstract & Company's General Business Profile
CORPORATE OBJECTIVE
Profit Maximization - It implies Maximization of PAT. It is criticised due to: It is vague and ambiguous concept. It ignores the time value of money. It ignores cash flows.
Wealth Maximization - It implies Maximizing the shareholders wealth or value. - Takes into account (i) the present and expected future earnings per share, (ii) risk of these earnings, (iii) dividend policy of the firm (iv) the timing duration, and (v) other factors that bear on the market price of the stock.
`Increasing shareholder value over time is the bottom line of every move we make - The Coca-Cola Company `We aim to maximize long-term shareholder value ABN AMRO Hero Honda Motors Limited has a history of creating value and maximizing returns for its shareholders `Since large corporations employ a vast quantum of societal resources, these resources should be utilized in a manner that meets stakeholders aspirations and societal expectations ITC Limited
EVA = Net Operating Profit after Tax (NOPAT)* - WACC (Cost of Debt +Equity) If NOPAT If NOPAT Cost Cost + EVA - EVA
EVA CASES
HUL (2004 2007)
2000 1500 1000 PAT 500 0 PAT EVA EVA
In cr.
HUL
2000 1500 1000 NOPAT 500 0 NOPAT Less: Cost of capital EVA Less: Cost of capital EVA 2003 1847 418 1429 2004 1,282 395 887 2005 1,367 353 1,014 2006 1,547 421 1,125 2007 1,786 446 1,340
2005 341
2006 412
2007 422
In million
DR. REDYYS
10,000 8,000 6,000 4,000 2,000 0 -2,000 -4,000 NOPAT Less: Cost of capital EVA 2004 2,350 2,269 80 2005 171 2,571 (2,400) 2006 1,823 3,052 (1,229) 2007 9,405 6,475 2,570 2008 4,942 6,309 (1,367) NOPAT Less: Cost of capital EVA
Improve EVA
Reduce Cost of Capital
Case (ITC) - ITCs corporate governance structure, systems and processes are based on two core principles:
Management must have the executive freedom to drive the enterprise forward without undue restrains; and The freedom of management should be exercised within a framework of effective accountability.