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MBA A FIN MGT NOTES

The document provides an analysis of liquidity and leverage ratios for two cases, including current, quick, and absolute cash ratios, with ideal benchmarks specified. It also details debt equity ratios, interest coverage ratios, and debt service coverage ratios, highlighting the financial health of low and high geared companies. Additionally, turnover ratios such as stock turnover are mentioned, with calculations for various financial metrics included.

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Raj Dharod
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9 views

MBA A FIN MGT NOTES

The document provides an analysis of liquidity and leverage ratios for two cases, including current, quick, and absolute cash ratios, with ideal benchmarks specified. It also details debt equity ratios, interest coverage ratios, and debt service coverage ratios, highlighting the financial health of low and high geared companies. Additionally, turnover ratios such as stock turnover are mentioned, with calculations for various financial metrics included.

Uploaded by

Raj Dharod
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as XLSX, PDF, TXT or read online on Scribd
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1 LIQUIDITY RATIOS

1) CURRENT RATIO=CURRENT ASSETS /CURRENT LIAB


IDEAL RATIO=2:1
IDEAL RATIO ACCEPTED BY FINANCIAL INSTITUTION=1.33:1

21 20
C.R=CA/CL 15854.59/26251.55 13568.76/25810.82
0.6:1 0.52:1

2) QUICK RATIO(ACID TEST RATIO)=QUICK ASSETS/CURR LIAB


OR
Q.R=Q.A/QUICK LIAB
QUICK ASSETS=CURRENT ASSETS-STOCK-PREPAID EXP
QUICK LIAB=CURRENT LIAB-BANK OVERDRAFT
IDEAL RATIO=1:1
21 20
QUICK ASSETS
CURRENT ASSETS 15,854.59 13,568.76 pg no 180
Less: Inventories -4,551.71 -3,831.92 pg no 180
Less : Prepaid expenses -127.37 -97.27 pg no 208
11,175.51 9,639.57

Quick liab
Current liab 26,251.55 25,810.82
Less Bank overdraft 0 0

Q.R=QA/CL 11,175.51/26,521.55 9639.57/25810.82


0.44:1 0.37:1

3) ABSOLUTE CASH RATIO OR SUPER QUICK RATIO=Cash in hand+ bank balance+marketable securities/current liab
IDEAL RATIO=0.5:1

Cash in hand 2365.54 2145.3


Bank bal 1953.4 1386.89
Marketable securities 0 0
4318.94 3532.19

Super quick ratio=4318.94/26251.55 3532.19/25810.82


0.16:1 0.14:1

CASE1 CASE 2
Equity(F.V Re 1) 1,000,000 300,000
Debt @10% 200,000 900,000
NPBIT 500,000 500,000 ASSUMED
Less Interest -20,000 -90,000
NPBT 480,000 410,000
Tax @25% -120,000 -102,500
NPAT 360,000 307,500

EPS=NPAT/NO OF SHARES 3,60,000/10,00,000 3,07,500/3,00,000


0.36 1.03
Low Geared co High geared co

DEBT MEANS-BORROWED FUNDS LOAN FUNDS


EQUITY MEANS OWN FUNDS

2) LEVERAGE RATIOS
1) DEBT EQUITY RATIO=DEBT/EQUITY*100
DEBT-Long term borrowings
EQUITY=SHAREHOLDERS FUNDS=EQUITY SHARE CAPITAL+RESERVES & SURPLUS

DEBT EQUITY RATIO 19,752.14/19055.97*100 18391.4/18387.65*100


103.65% 100.02%

2) INTEREST COVERAGE RATIO=NPBIT/INTEREST


21 20
NPBIT
NPBT -2312.57 -7127.34
Add INTEREST 2358.54 1973
NPBIT 45.97 -5154.34

INTEREST COVERAGE RATIO

45.97/2358.54 (5154.34)/1973

0.019 TIMES NA

3) DEBT SERVICE COVERAGE RATIO (DSCR)=NPAT+INTEREST+ DEPRECIATION & AMORTISATION/INTEREST+LOAN REPAYMENT


21 20
NUMERATOR
NPAT -1952.45 -7668.35
ADD INTEREST 2358.54 1973
ADD DEPRECIATION 3681.61 3375.29
4087.7 -2320.06

DENOMINATOR
INTEREST 2358.54 1973
LOAN REPAYMENT
Term loans from bank 93.86
privately placed NCD 2399.29 299.18
External commercial borrowings 56.79
Senior notes 133.63
4985.32 2272.18

DSCR=4087.7/4985.32 (2320.06)/2272.18

0.82TIMES N.A

3 ) TURNOVER RATIOS
1) STOCK TURNOVER RATIO=COGS/AVG STOCK

COGS 21 20
Raw mat consumed 30,010.61 26,171.85
Purchase of products 5490.67 5,679.98
Changes in inventory -69.02 722.68
Employee benefit exp 4,212.99 4,384.31
Foreign exc loss 1.67 239.00
Depreciation total 3,681.61 3,375.29
Less Dep on vehicles -51.18 -53.10
Product development exp 907.64 830.24
other exp 5,801.90 7,720.75
Less publicity -444.37 -846.60
less trade exp -73.37 -30.91
49,469.15 48,193.49
urities/current liab
GROSS PROFIT OR NPBIT

LESS INTEREST
NPBT
LESS TAX
NPAT

NPBIT=NPBT+INTEREST

/INTEREST+LOAN REPAYMENT

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