A) Current ratio = CA/CL = 2.5/1
CL = 800 crores
CA = 800 X 2.5 times = 2000 croes
Quick ratio = QA/QL = 2000 - 400/800
1600/800 = 2 times
2:1
Note: Current assets are 2.5 times more than current liabilities. Formula for Quick Ratio: Quick assets (by reducing inventory from current assets)/Quick Liabilities (here they haven’t given any additional info about debt or bank O/D)
b) A company's debt-to-equity ratio is 1.5:1.
The debt percentage cost to the company is 10%
Equity costs at 12% to the company
The tax rate is 30%
Calculate the Weighted average cost of capital of a company
Note: Interest on debt is 10%. Plus, they’ve clearly given debt-to-equity ratio is 1.5:1. Here we’ve to find what is the percentage of debt & equity in the co. whenever any numerical question comes, see the question & get your answer and then match with the options given.
To find the total B/S size we need to add debt & equity. So after cross multiplication we get the debt percentage as 60% and remaining of equity. We also need to find the cost of debt to the co. Here we’re getting 30% tax benefit on taking debt so the cost of debt is 7%
b) Net Profit: Rs. 10 lakh
No. of equity shares: 40,000
Retained earning ratio is 40%
Calculate the Dividend per share and dividend payout ratio
Note : TO calculate dividend per share we need to calculate EPS (further divided into retained earning as reserves & surplus and 2nd part as dividends to shareholders). After getting our EPS value of ₹25, you can verify by substituting.
c) The certificate of registration to a Research Analyst under regulation 9 is valid for years.
Note:
As per the SEBI regulation 9 for NISM research analyst registration, the certification of registration is valid until the board cancels or suspend the certificate.
Bonus Question:
a) Mutual fund NAV at the beginning when purchased was Rs. 16
Current NAV is Rs. 27
Period of holding : 2 years.
Calculated Compounded return/growth?
This type of question was solved with number of days and years too. CAGR can only be calculated when number of day invested is more than 365 and less than 2 years. Yearwise it is easy to find compounded growth. Investment period is of 2 years. You need to calculate compounded annual growth rate.
For formula we’ll take current value divided by beginning value and after substitution we get. For this sum we recommend students to use screen calculator getting the final answer as 29.30% .
d) _____section in the cash flow statement will provide information about the amount of funds received by selling a company premises during the preceding year.
When the premises (assets) of the company are sold out, cash comes in. Premises are assets related.
Dealing with the company’s assets is considered a long term investing activity. So this type of transaction will come under investing cashflow statement.
e) The NPAs are typically low when
Non performing assets. This term is related to banking & NBFCs. These NPAs are low when the interest on loans are low, this decreases the burden on the borrower to repay it soon .
f) _________ has the authority given by the Ministry of Corporate Affairs to register companies and to ensure that they comply with the provisions of the Companies Act 2013
When any company wants to get themselves registered (LLP, corporate entity, Pvt. Ltd, public etc.) all of them need to go to the ROC for registering ehtemseleves which comes under Ministry of corporate affairs
g) Following is the current asset item:
Current assets are those assets which are converted from to 1 day to 1 year. When you lend someone money, it becomes account receivable for you which can give your money back, generally account receivable is converted into cash within a year.
Marketable securities (bonds, dentures, treasury bills, all the money market securities.) easily convertible into cash. Inventory can be raw material or finished goods can be sold in the market to get cash inflow. Deffered pretax payment can be the current asset item.
H) Subscribing to the right issue is a choice and not a compulsion for investors.
Right to issue itself means that the investors has the right to chose to subscribe or unsubscribe to the shares for the existing sharehodlers.
While subscribing to the right issue, there’s a book date on which you submit the order and record date is when the stocks are reflected and you become eligible to perform desired corporate action.
Investors need to fill the application (with a physical form) to their broker for subscribing to the right issue. Investors can also transfer this right issue to other person.
i) The current inventory of the company: Rs 75,000
The average age of inventory: 25 days
Calculate sales of a company:
This type of questions are very simple, just need to solve with attention.
First we need to calculate the Inventory T/O (churn) ratio. 365 days taken because period is mentioned in days.
Average days inventory is waiting is of 25 days.
Therefore 14.6 times the inventory is churned out in a single year.
j) Opening stock: 2,00,000
Purchases: 15,00,000
Cost of goods sold: 10,00,000
Calculate: Closing stock
Here we apply the formula of cost of goods sold to calculated closing stock
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