fin630 assignment no 2 idea solution spring 11 November 2011

[Vuhelper]

Question #01. You are required to calculate the following:



Quick Ratio = Current assets - inventories / current liabilities

= 937 - 212 / 409

=1.77 times



Net profit Margin = Profit after Tax / Net Sales x 100

= 50,150 / 105,000*100

= 47.7 = 48 %



Times Interest Earned (Interest Coverage Ratio) = BIT / Interest Expense

= 50,150 / 2,550

= 19.6 times

Ratios




Industry average




Company's ratio

Ranking


(poor/good or

low/high)

Quick


1.75 Times


1.77 times


good

Net Profit Margin


35%


48%


good

Interest coverage


16 Times


19 times


good

Earning per share


Rs. 1.35


?


?

[Vuhelper]

Solution of Question no.1:-



Quick Ratio / Acid Test Ratio = (current assets – Inventory) / (current Liabilities)

Quick Ratio / Acid Test Ratio = ((937.000 + 200,000) – 212,000) / 409,000

Quick Ratio / Acid Test Ratio = (1137, 000 – 212,000) / 409,000

Quick Ratio / Acid Test Ratio = (925,000) / 409,000

Quick Ratio / Acid Test Ratio = 2.261 times



Interest coverage Ratio = EBIT / Interest expenses

Interest coverage Ratio = (50, 15,000 / 2550, 000)

Interest coverage Ratio = 19.67 %



Earnings per Share = Profit available to Shareholders / Average common shares outstanding

Earnings per Share = (3,09,40,000 – 12,30,000) / 2000000

Earnings per Share = 14.85 Rs.



Net Profit Margin = (Net Income/ Net Sales)* 100

Net Profit Margin = (3, 09, 40,000 / 105, 000,000) * 100

Net Profit Margin = (0.477) * 100

Net Profit Margin = 29.46 %





Intrinsic Value of Stock = Future Value / Expected ROI Number of Years

Intrinsic Value of Stock = D1/(r-g)

Intrinsic Value of Stock = 5.30 / (12% - 0) 1

Intrinsic Value of Stock = 5.30/ (12-0) = 5.30/ (12%)

Intrinsic Value of Stock = 44.16

[Vuhelper]

Ratio


Industry Average


Company Ratio Ranking


Ranking

(Poor / Good)

Quick


1.75 Times


2.26 times


Good

Net Profit Margin


35%


29.47 %


Poor

Interest coverage


16 Times


19.67 Times


Good

Earning per share


Rs. 1.35


Rs. 14.85


Good