ca inter suggested answers | Nov 23 FME Paper
Table of Content
Section - (A)
You are available with following information of Brave Ltd.
| Debtor’s velocity | 3 months |
| Stock velocity | 6 months |
| Creditor’s velocity | 2 months |
| Gross profit ratio | 20% |
The gross profit for the year ended 31st March, 2023 was ₹ 10,00,000. Stock for the same period was ₹ 40,000 more than what it was at the beginning of the year. Bills receivable were ₹ 1,20,000
From the above information, you are required to calculate :
(i) Sales
(i) Sundry debtors
(iii) Closing stock
Answer 1 : (A)
The following details of Shiva Ltd. for the year ended 31st March, 2023 are given below :
| Operating Leverage | 1.4 |
| Combified Leverage | 2.8 |
| Fixed Cost (Excluding Interest) | ₹ 2.04 lakhs |
| Sales | ₹ 30 lakhs |
| 12% Debentures of ₹ 10 each | ₹ 21.25 lakhs |
| Equity Share Capital of ₹ 10 each | ₹ 17.00 lakhs |
| Income Tax Rate | 30% |
Required :
(i) Calculate P/V ratio and Earning Per Share (EPS)
(ii) If the company belongs to an industry, whose assets turnover is 1.5, does it have a high or low assets turnover ?
(iii) Financial Leverage
Answer 1 : (B)
(i) EPS ofa company is ₹ 60 and Dividend payout ratio is 60%. Multiplier is 5. Determine price per share as per Graham & Dodd model.
(ii) Last year’s dividend is ₹ 6.34, adjustment factor is 45%, target payout ratio is 60% and current year’s EPS is ₹ 12. Compute current’s year’s dividend using Linter’s model.
Answer 1 : (C)
X Ltd. has furnished following cost sheet of per unit cost ;
| Raw material cost | ₹ 150 |
| Direct labour cost | ₹ 40 |
| Overhead cost | ₹ 60 |
| Total Cost | ₹ 250 |
| Profit | ₹ 50 |
| Selling Price | ₹ 300 |
The company keeps raw material in stock on an average for 2 months; work in progress on an average for 3 months and finished goods in stock on an average 1 month. The credit allowed by suppliers is 1.5 months and company allows 2 months credit to its debtors. The lag in payment of wages is 1 month and lag in payment of overhead expenses is 1.5 months. The company sells 25% of the output against cash and maintain cash in hand at bank put together at ₹ 1,50,000. Production is carried on evenly throughout the year and wages and overheads also similarly. Work in progress stock is 75% complete in all respects. Prepare statement showing estimate of working capital requirements to finance an activity level of 15,000 units of production,
Answer 1 : (D)
COMING SOON
The data of K Textiles Ltd. are given as follows :
| Particulars | Amount(₹) |
| Profit Before Interest and Tax | 50,00,000 |
| Less: Interest on debentures @ 10% | 10,00,000 |
| Profit before tax | 40,00,000 |
| Less: Income tax @ 50% | 20,00,000 |
| Profit after tax | 20,00,000 |
| No. of equity shares (₹ 10 each) | 10,00,000 |
| EPS | 2 |
| PE Ratio | 10 |
| Market price per share | 20 |
The Company is planning to start a new project needs to be having a total capital outlay of ₹ 40,00,000. You are informed that debt equity ratio [D/D+E] higher than 36% pushes the Ke (cost of equity) up to 12.5%, means reducing the PE ratio to 8 and rises the interest rate on additional amount borrowed to 12%. Retained earnings of the company is ₹ 1.4 crores. Find out the probable price of share if :
Answer 2 :
ABC Ltd. is considering to purchase a machine which is priced at ₹ 5,00,000.The estimated life of machine is 5 years and has an expected salvage value of ₹ 45,000 at the end of 5 years. It is expected to generate revenues of ₹ 1,50,000 per annum for five years. The annual operating cost of the machine is ₹ 28,125, Corporate Tax Rate is 20% and the cost of capital is 10%. You are required to analyse whether it would be profitable for the company to purchase the machine by using;
(i) Payback period Method
(ii) Net Present value method
(iii) Profitability Index Method
Answer 3 :
