Sample Paper 5

SP Jain Center of Management - Dubai/Singapore

Advanced Finance Statement Analysis

Q.1. For Maurti Udyog Ltd., for the financial year ended 2004, 2005 and 2006 carry out

the

(i) Dupont Analysis (ROE and its components)

(ii) Inventory, Receivables Turnover Analysis.

(iii) During 2004-2006, Find out the CARG for Net Sales and EBDIT.

Why growth in EBDIT is greater than growth in sales?

(10 Marks)

Q.2. a) For the last year 2005-2006, do the fund flow analysis, clearly highlighting the

(i) Funds from Operations

(ii) Funds from Investing

(iii) Funds from Financing

b) For the year 2005-2006 find the Free cash flows to firm (FCFF). For the purpose

of FCFF, you may consider only operating / core profits and Investment only in

operating assets and operating working capital.

(10 Marks)

Q.3. The following information about a company is given to you.

1) Sales for the next five years 1 Million per annum

2) Cost of Goods Sold @ 60% of Sales

3) Selling, General & Administration @ 10% of sales

4) Depreciation for fixed assets of 5,00,000 @ 1,00,000 per annum (SLM) and

2,00,000, 2,00,000, 1,00,000 (as per accelerated method acceptable to tax

authorities)

5) There is no debt in the company.

For the next 5 years,

i) Calculate the Deferred Tax liability for each year.

ii) Also show the Balance sheet figure of Deferred tax liability(Asset) for the next five years.

iii) What’s the economic rationale for treating deferred taxes as part of capital.

(5 Marks)

Q.4. Briefly discuss the following:

i) PE Multiple and its determinants

ii) P/BV multiple and its determinants

iii) EBITDA multiple and why EBITDA multiple is preferred over PE multiple in relative valuation

iv) Impact of capitalizing R&D expenses on Net profits, Free cash flows, Reinvestment ratio and ROE.

v) Relationship between ROE and ROC.

(2 x 5 = 10 Marks)

Q.5. The Balance Sheet of two companies A and T for Financial year ended 2006 is given

below:

Figures in Millions $

Company A

Particulars		Particulars
Shareholders Funds	500	Net Fixed Assets	700
Long term loans	250	Current Assets	300
Current Liablities	250
	1000		1000

Company T

Particulars		Particulars
Shareholders Funds	100	Net Fixed Assets	200
Long term loans	150	Current Assets	100
Current Liablities	100
	300		300

Company A acquires 100% of Company T at the current market capitalization of

200 Million dollars against a book value of 100 million dollars. Company A

borrows 200 million dollars to pay for the acquisition. Company A also revalues the

NFA of T at a face value of 240 Million dollars against the book value of 200 million

dollars.

1) You are required to show the consolidated balance sheet of 2006

2) Make the consolidated balance sheet assuming Company A had acquired 70% stake in Company T

3) What does the Minority interest appearing in the Liability of consolidated Balance sheet indicate?

(5 Marks)

Q6. Using the following information , complete the Balance Sheet

Long –term debt to net worth: 0.5:1

Total Asset Turnover: 2.5: 1

Average Collection period : 18 days ( Assuming 360 days)

Inventory Turnover: 9 times

Gross Profit Margin: 10%

Acid Test Ratio : 1:1

Common Stock: 100,000 Property , Plant & Equip: --------

Retained Earnings: 100,000 Inventory:-------

Long- Term Debt : ------- Accounts Receivable:---------

Current Liabilities: 100,000 Cash : ----------- (5 marks)