fm-ii, forecasting sums

8/8/2019 FM-II, Forecasting Sums

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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.

fm-ii, forecasting sums

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