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1. The balance sheet of Pradhan Company at the end of year 2009, which is just over, is given below:
Rs.'000)
Share capital 50 Fixed assets 130
Retained earnings 60 Inventories 90
ong term loans 80 Receivables 80
Short term borrowings 60 Cash 20
Trade creditors 50
Provisions 20
320 320
The sales for the year just ended were Rs.4,00000The expected sales for the year 2010 are Rs.5,00000 Net profit margin is 5% andividend payout ratio is 50%.
Required:
. Determine the external funds requirement for Pradhan for the year 2010.
. How should the company raise its external funds requirements, ifthe following restrictions apply?
i. Current ratio should not be less than 1 .33
ii. The ratio offixed asset to long term loans should be greater than 1.5.
Assume that the company wants to tap external funds in the following order:short term bank borrowing, long term loans, and additionquity issue.
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2. The balance sheet ofDamodar Chemicals Limited as on 31st March, 2010 is given below:
Rs.in lakhs
Share Capital 75 Fixed Assets 200
Retained Earnings 90 Inventories 100
Term Loans 40 Receivables 75
Short-term Bank Borrowings 100 Cash 25
Accounts Payable 70
Provisions 25
Total 400 400
The sales of the company for the year ending 31.3.2010 amounted to Rs.500 lakhs with a profit margin of 6 per cent. The dividayout ratio was 50% and the tax rate was 60%. The company expects its sales to rise by 30% for the year 2010-11. The ratiossets to sales and spontaneous current liabilities to sales is forecast to remain unchanged. The profit margin ratio, the rate anhe dividend payout ratio are also expected to remain unchanged.
Required:
Estimate the external funds requirement for the year 2010-11
. Assuming that the external funds requirement would be raised equally from term loans and short-term bank borrowings,raw up the projected balance sheet as at 31st March, 2011.
3. The balance sheet ofPragathi Limited as on 31st March, 2010 is given below:
Rs in lacs
Share Capital 25 Net Fixed Assets 100
Retained Earnings 35 Inventories 50
Term Loans 60 Accounts receivable 35
Bank borrowings 30 Cash 15
Accounts payable 40
Provisions 10
Total 200 Total 200
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Net sales for the year 31 st March, 2010 wereRs.400 lakhs and the projected sales for the year 2010-11are RS.500 lakhs. Tet profit margin on sales is 5% and dividend payout ratio is 60%. The tax rate for the company is 50%.
. Estimate the external funds requirement for the next year (2010-11)
. Prepare the following statements, assuming that the external funds would be raised equally from term loans and short-term bank borrowings.
i. Projected balance sheet
ii. Projected income statement
iii. .. Projected sources and uses of funds statement.
4. The balance sheet of Exotica Limited as on March, 31, 2010is given below:
Liabilities Rs. lakhs Assets Rs. lakhs
Share capital 100 Fixed assets 250
Retained 70 Inventories. 150
earnings
Long-term 180 Receivables 120
oans
Short- term 100 Cash 30
borrowings
Payables 60
Provisions 40
Total 550 Total 550
Sales for the year 2010 were RS.600 lakhs. For the year 2011 sales are expected to increase by 20%. The profit margin andividend pay-out ratio are expected to be 5% and 60% respectively.
Required:
. Determine the external fund requirement for the year 2011.
. How should the company raise its external fund requirement if the following constraints are to be satisfied:
i. . Current ratio should be at least 1 .33
ii. The ratio of fixed assets to long-term loans should at most be 1.5
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iii. Long-term debt to equity ratio should at most be 1.2
Assume that the company wants to tap external funds in the following order.
Short term bank borrowing, long term loans and additional equity issues
5. The asset to sales ratio of Hi-Fly Company is 0.8 and the ratio of spontaneous liabilities to salesis 0.6 for the present year. Existing sales revenue is Rs.1,000. The company follows a retentionratio of0.4.
If the company plans to achieve a 10% increase in sales without taking recourse to external funds, Whatwould be the profit margin?
6. The balance sheet of Manjusha Limited as at the end of March 31st
2010 is given below:
(Rs 000)
Share Capital 100 Fixed Assets200
Retained 120 Inventories 140
earnings
Long-term loans 100 Receivables 120
Short-term bank 80 Cash 20
borrowings
Payables 50
Provisions 30
- 480
480
The sales for the year ended 2010 were Rs.6,00000. Expected sales for the year 2011 are Rs.7,50000.The profit margin is 5% and dividend pay-out ratio is 50%.
Calculate the external fund requirement for the year 2011.