3. Total assets = Total liabilities = 216,00,000 12,00,000 long-term funds +24,00,000 CL.). 4. Fixed assets = 216,00,000, Total assets - 28,00,000, CA = 28,00,000. 5. FA/Turnover (sales) = 1/3 or Sales = 28,00,000 X 3 = 224,00,000. 6. Proportion of cash sales to credit sales is 1:2 or cash sales are one-third of total sales, i.e. 1/3 X 24,00,000 = 28,00,000; credit sales = 16,00,000 7. Gross profit = 0.25 X 24,00,000 = 26,00,000; cost of goods sold = 18,00,000 8. Debtors = 216,00,000/6 (Debtors tumover ratio, 12 + 2) = {2,66,667. 9. Stock = 18,00,000/6 (Stock turnover ratio, 12 + 2) = 23,00,000. 10. Other CAS = 28,00,000 - 2,66,667 + 23,00,00) = {2,33,333. 11. Reserves = 0.025 x 224,00,000 = 260,000. 12. Credit purchases Cost of goods sold + Closing stock = 218,00,000 + 23,00,000 = {21,00,000. 13. Creditors = 321,00,000 + 6 (creditors turnover ratio, 12 + 2) = 33,50,000. 14. Other CLs = Total Cl. - Creditors, i.e. 24,00,000 - 33,50,000 = 150,000. 15. Debentures to share capital ratio of 1:2 implies that debentures in value are equal to one-half of share capital (2 Debentures - Share capital). Further, capital block (as per working note 3) is 12,00,000. 212,00,000 = Debentures + Share capital + Net profit + Reserves 23,00,000 = capital = P.6.14 As the manager of a financial services company, you have received a proposal seeking a term loan of 300 lakh, from a firm planning an investment in fixed assets of 500 lakh in a new project. The loan is indicated to be repayable in three annual instalments commencing from the end of the second year. The following information concerning the project is available: R in lakh) Particulars Year 1 3 Gross profit (before depreciation) 75 150 150 Depreciation 50 40 Interest on term loan 25 30 15 Working capital borrowing interest) 10 20 Provision for tax 10 30 Assuming other techno-economic criteria to be satisfactory, you are required to: (a) compute appropriate financial ratio which, in your opinion, would guide the financing decision, and (b) interpret briefly the ratio so computed and give your views on the proposal. 32,000 -- 13 Debentures # 2240,0-40 per cent of sales) + 260,000 y 22 4 2 100 45 45 15 35 20 3. Total assets = Total liabilities = 216,00,000 12,00,000 long-term funds +24,00,000 CL.). 4. Fixed assets = 216,00,000, Total assets - 28,00,000, CA = 28,00,000. 5. FA/Turnover (sales) = 1/3 or Sales = 28,00,000 X 3 = 224,00,000. 6. Proportion of cash sales to credit sales is 1:2 or cash sales are one-third of total sales, i.e. 1/3 X 24,00,000 = 28,00,000; credit sales = 16,00,000 7. Gross profit = 0.25 X 24,00,000 = 26,00,000; cost of goods sold = 18,00,000 8. Debtors = 216,00,000/6 (Debtors tumover ratio, 12 + 2) = {2,66,667. 9. Stock = 18,00,000/6 (Stock turnover ratio, 12 + 2) = 23,00,000. 10. Other CAS = 28,00,000 - 2,66,667 + 23,00,00) = {2,33,333. 11. Reserves = 0.025 x 224,00,000 = 260,000. 12. Credit purchases Cost of goods sold + Closing stock = 218,00,000 + 23,00,000 = {21,00,000. 13. Creditors = 321,00,000 + 6 (creditors turnover ratio, 12 + 2) = 33,50,000. 14. Other CLs = Total Cl. - Creditors, i.e. 24,00,000 - 33,50,000 = 150,000. 15. Debentures to share capital ratio of 1:2 implies that debentures in value are equal to one-half of share capital (2 Debentures - Share capital). Further, capital block (as per working note 3) is 12,00,000. 212,00,000 = Debentures + Share capital + Net profit + Reserves 23,00,000 = capital = P.6.14 As the manager of a financial services company, you have received a proposal seeking a term loan of 300 lakh, from a firm planning an investment in fixed assets of 500 lakh in a new project. The loan is indicated to be repayable in three annual instalments commencing from the end of the second year. The following information concerning the project is available: R in lakh) Particulars Year 1 3 Gross profit (before depreciation) 75 150 150 Depreciation 50 40 Interest on term loan 25 30 15 Working capital borrowing interest) 10 20 Provision for tax 10 30 Assuming other techno-economic criteria to be satisfactory, you are required to: (a) compute appropriate financial ratio which, in your opinion, would guide the financing decision, and (b) interpret briefly the ratio so computed and give your views on the proposal. 32,000 -- 13 Debentures # 2240,0-40 per cent of sales) + 260,000 y 22 4 2 100 45 45 15 35 20