Q.

The following are the Income statements and

Balance sheets of two companies which are
engaged in the manufacture of Television sets,
Music Systems and such other items:
Income Statements for the year ended 31st
December, 2002
Particular’s GL Ltd. LPB
Ltd.
Sales 11,500, 16,000,
Less: Cost of 000 000
goods sold 8,200,0 10,400,
00 000
Gross Profit 3,300,0 5,600,0
Less: Other 00 00
Expenses 1,935,0 3,227,5
00 00
Net Profit 1,365,0 2,372,5
before Interest 00 00
and tax 165,000 172,500
Less: Interest
Net Profit 1,200,0 2,200,0
before tax 00 00
Less: Tax 400,000 720,000
Profit after tax 800,000 1,480,0
00
Dividend 480,000 1,110,0
00
Retained 320,000 370,000
earnings
Balance sheets as at 31st December, 2002
Particulars GL Ltd. LPB
 Ltd.
Paid up 10,00, 20,00,
Equity 000 000
Share
Capital 3,50,0 5,00,0
Reserves 00 00
Long Term 13,50, 15,00,
loans 000 000
Total Funds 27,00, 40,00,
Available 000 000
Fixed Assets 17,00, 28,00,
Working 000 000
Assets 10,00, 12,00,
000 000
Total Funds 27,00, 40,00,
Employed 000 000
Other information:
(a) The
Equity share capital of GL Ltd. Consisted of
1,00,000 equity shares of Rs. 10 each. On 1st
January 2003, the company plans to issue
10,000 Equity shares of Rs. 10 each at a
premium of Rs. 20 per share.
(b) The sales of GL are expected to increase by
33% in the year 2003. The net profit margin
ratio is expected to be maintained at the
existing level of 2002.
(c) The equity share capital of LPB Ltd.
Consisted of 2,00,000 Equity shares of Rs. 10
each. The sales of LPB Ltd. Are expected to
increase by 18% in the year 2003. The net
 profit margin ratio is expected to be
maintained at the existing level of 2002.
(d) The average market prices of the shares of the
two companies during the year 2002 were as
under:
GL Ltd. Rs. 160
LPB Ltd. Rs. 111
You are required to calculate the following .
(i) Return on Capital Employed -Current
(ii) Return on Equity capital
(iii) Capital Gearing Ratio.
(iv) Capital Turnover Ratio.
(v) Net profit margin Ratio.
(vi) Dividend Yield
(vii) Price Earnings Ratio.
(viii) Projected Earning s per share for the year
2003.
(ix) Price projections based on the projected
performance for the year 2003 (rounded off
to the nearest rupee), assuming that the P/E
Ratio of 2002 will remain unchanged in the
year 2003.
Q. Following information is available for Swift Co.
along with various ratio relevant to the particular
industry to which it belongs. Find out the relevant
ratios relating to Swift Co. and give your comments
on the strengths and weaknesses of Swift Co. and
give your comments on the strengths and
weaknesses of Swift co. by comparing its ratios
with industry norms. As an investment counselor
would you advise your clients to invest In the share
of the company, if the shares are currently
available at Rs. 4 per shares.
BALANCESHEET AS AT 31-3-2000
Liabilities Rs. Assets Rs.
Equity 24,00,000 Net fixed 12,10,000
Shares assets
Capital
(face value
Rs. 10)
10% 4,60,000 Cash 4,40,000
Debentures
Sundry 3,30,000 Sundry 5,50,000
Creditors Debtors
Bills 3,00,000 Stock 16,50,000
payable
Other 2,20,000
Current
Liabilities
Reserves 1,40,000
38,50,000 38,50,000
Statement of Profitability for the year ended 31-3-
2000
Particulars Rs. Rs.
Sales 55,00,00
Less: Cost of Goods
Sold 20,90,000
Material 13,20,000
Wages 6,49,000 40,59,000
Factory Overheads
Gross Profit 14,41,000
Less: Selling and 5,50,000
Distribution Cost
Administration Cost 6,14,000 11,64,000
Earnings before 2,77,000
interest and Taxes
Less: Interest 46,000
Charges
Earnings before tax 2,31,000
Less: Taxes 1,15,500
Net Profit 1,15,500

Industry Norms
Ratios Nor
Considered ms
Sales \ 9.0
Stock
Sales / Total 2.0
Assets
Net Profit / 3.5%
Sales
Net Profit / 7.0%
Total Assets
Net Profit / 10.5
Net Worth %
Total Debt/ 60.0
Total Assets %
Price / 15
Earnings
Ratio