1. Take an organization of your choice & find out how the Accounting Reports are prepared by them and how these reports are useful for managers while making decisions relating to the activities of a Business.
Ans : Accounting reports are …are derived from the… of a specific purpose …. equivalent to the financial statements….
….. evaluate business processes and company strategy…
Owners and managers require financial ….continued operations… management’s annual report to the stockholders.
2. Prepare the Cash Flow Statement for XYZ Ltd. for the year 2015-16 and analyze its cash flow position.
Balance Sheet Of XYZ on 31st March
| Liabilities & Equity | 2016
(Rs. in Lakhs) |
2015
(Rs. in lakhs) |
| Equity share capital | 1100 | 1000 |
| Reserves and surplus | 400 | 200 |
| P&L balance | 270 | 250 |
| L.T borrowing | 600 | 500 |
| Current liabilities | 270 | 200 |
| Provision of taxation | 240 | 150 |
| Proposed dividends | 110 | 100 |
| Total | 2990 | 2400 |
| Assets | ||
| Gross fixed assets | 1500 | 1200 |
| Less : Accumulated Dep. | 780 | 600 |
| Net Fixed Assets | 720 | 600 |
| Long Term Investments | 500 | 400 |
| Inventories | 380 | 200 |
| Debtors | 240 | 160 |
| Cash and Bank Balance | 100 | 60 |
| Loans & Advances | 1050 | 980 |
| Total | 2990 | 2400 |
P & L Accounts for the year 2006 – 07 (as on 31st March 2016)
| Income | Rs in Lakhs |
| Sales | 2520 |
| Other Income | 304 |
| Stock Adjustment | 36 |
| Total | 2860 |
| Expenditure | 1430 |
| Raw Material Consumed | 280 |
| Manufacturing Expenses | 160 |
| Selling & Distribution Expenses | 130 |
| Depreciation | 180 |
| Interest | 110 |
| Total | 2290 |
| Profit Before Tax (PBT) | 570 |
| Provision For Taxes | 240 |
| Profit After Tax (PAT) | 330 |
| P & L At The Beginning Of The Year | 250 |
| Profit Available For Appropriation | 580 |
| Transfer To Reserves | 200 |
| Proposed Dividends (incl. div. tax) | 100 |
| Balance Profit Carried To B/S | 270 |
The following additional information has been provided regarding the firm:
(i) Current liabilities denote amount that is payable to suppliers.
(ii) Raw materials constitute 80% of the inventory balance of the firm.
(iii)Loans and advance include income tax paid Rs. 240 lakh (previous year Rs. 150 lakh)
(iv) During 2015-16 10 lakh of equity shares of Rs. 10 each were issued at par. Long-term loans raised during the year amounted to Rs. 160 lakh.
(v) The interest shown in the P&L account has actually been paid for in cash and other income is realized in cash.
3. With the help of a suitable illustration, explain how the costs and volume influence profit of a business.
Ans : … profit planning, company first declares… ensuring year. Thereafter sales … profit planning in the….
The report to the management should contain… current year is commended.
4. A Company is considering to replace an existing machine for which two suppliers have given quotation. Supplier A has proposed a machine costing Rs. 180 lakh that uses the existing boiler while supplier B has quoted for the machine Rs. 110 lakh but that requires modification in the existing energy supply system costing Rs. 30 lakh. The machines have a life of 10 years and can be sold for 5% and 10% of the original cost respectively for Suppliers A and B. The additional working capital requirement expressed as % of revenue are 20% and 25% respectively because of larger requirement of fuel for the machine from
Supplier B. The details are condensed below :
| Supplier A | Supplier B | |
| Price Of Machine | 180 | 135 |
| Annual Cash Flows | ||
| Revenue | 200 | 205 |
| Operating Cost | 150 | 155 |
| Working Capital (% Of Revenue) | 20% | 25% |
| Salvage Value % Of Cost | 20% | 5% |
The firm charges depreciation on SLM basis with zero book value and has a tax rate of 35% for all kinds of income. The cost of capital for the firm is 12%
Which of the suppliers should the company prefer?
(a) as per NPV rule
(b) as per IRR rule.
5. How would you judge the efficiency of the management of working capital in a business enterprise? Explain with the help of hypothetical data.
Ans : Analysts and investors look at a… financial health… on a day to day basis…. accounts receivable and inventory…. and the collection ratio…
A number of ratios … effectively working capital is …. greater are profits … is not effectively used…
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