Profitability ProjectionsProfit & Loss Account for the year
ended 31.03.2012ParticularsAmount ( Rs. In Lakhs)A.Operating
Sales/Revenue/Income/Top line/Turnover2000B.Cost of goods
sold(Direct Material, Labour and Factory Overheads)1000C = (
A-B)Gross Profit1000AA.Non-operational income / Other
Income200DAdministrative / Selling & Distribution Expenses100E
= (C+AA-D)Profit before Depreciation, Interest and Taxes
(PBDIT)1100FDepreciation20G = (E-F)Profit before interest and taxes
(PBIT)1080HInterest10I = (G-H)Profit before tax1070JTax380K=
(I-J)Profit after tax690LDividends20M = (K-L)Retained
earnings670Exercise No. 1Compute Gross Profit: Profit Before
Depreciation, Interest and Tax(PBDIT); Profit Before interest and
tax(PBIT); Profit Before Tax(PBT); Profit After Tax(PAT) and
Retained Earnings (RE).ParticularsAmount (Rs.)Product
Sales100000Cost of Production65000Miscellaneous Income10000Selling
& Distbn. Expenses1000Administrative
expenses15000Depreciation5000Interest expenses1000Dividend1000Tax
at 35 %
Exercise No. 1Profit & Loss Account for the year ended
31.03.2012ParticularsAmount (Rs.)A.Operating
Sales/Revenue/Income/Top line/Turnover100000B.Cost of goods
sold(Direct Material, Labour and Factory Overheads)65000C = (
A-B)Gross Profit35000AA.Non-operational income / Other
Income10000DAdministrative / Selling & Distribution
Expenses16000E = (C+AA-D)Profit before Depreciation, Interest and
Taxes (PBDIT)29000FDepreciation5000G = (E-F)Profit before interest
and taxes (PBIT)24000HInterest1000I = (G-H)Profit before
tax23000JTax8050K= (I-J)Profit after tax14950LDividends1000450M =
(K-L)Retained earnings1395014301045Exercise No. 1Given the
following data, compute Gross Profit: Profit Before Depreciation,
Interest and Tax(PBDIT); Profit Before interest and tax(PBIT);
Profit Before Tax(PBT); Profit After Tax(PAT) and Retained Earnings
(RE).ParticularsAmount (Rs.)Product Sales100000Cost of
Production65000Miscellaneous Income10000Selling & Distbn.
Expenses1000Administrative expenses15000Depreciation5000Interest
expenses1000Dividend1000Tax at 35 %
Solution to Exercise No. 1Solution :Profit & Loss Account
for the year ended 31.03.2012ParticularsAmount (Rs.)Exercise No.
1Given the following data, compute Gross Profit: Profit Before
Depreciation, Interest and Tax(PBDIT); Profit Before interest and
tax(PBIT); Profit Before Tax(PBT); Profit After Tax(PAT) and
Retained Earnings (RE).ParticularsAmount (Rs.)Product
Sales100000Cost of Production65000Miscellaneous Income10000Selling
& Distbn. Expenses1000Administrative
expenses15000Depreciation5000Interest expenses1000Dividend1000Tax
at 35 %
Balance Sheet Balance Sheet as at 31/03/2012LiabilitiesAmount
(Rs. In Lakhs)AssetsAmount (Rs. In Lakhs)CapitalFixed
Assets335Share Capital100Land & Buildings200Equity70Plant &
Machinery100Preference30Vehicles30Reserves and
Surplus1170Computers5Opening Balance500Investments50Retained
Earnings670Loans130Secured Loans80Current Assets1045Unsecured
Loans50Cash480Inventories435Current
Liabilities30Receivables120Creditors10Loans and
Advances10Provisions20Total1430Total1430
Exercise No. 2Exercise No. 2Prepare Projected Cash Flow
Statement of Aditya EnterprisesThe Balance Sheet of Aditya
Enterprises at the end of year n (the year which is just over) is
as follows:LiabilitiesAmount (Rs. In Lakhs)AssetsAmount (Rs. In
Lakhs)Share Capital100Fixed Assets180Reserves and
Surplus20Investments0Secured Loans80Current Assets180Unsecured
Loans50Cash20Current
Liabilities90Receivables80Provisions20Inventories80Total360Total360The
projected income statement and the distribution of earnings for
year n+1 is given below:ParticularsAmount (Rs. In
Lakhs)Sales400Cost of goods sold300Depreciation20Profit before
interest and taxes (PBIT)80Interest20Profit before tax60Tax30Profit
after tax30Dividends10Retained earnings20Other information : During
n+1, the firm plans toParticularsAmount (Rs. In Lakhs)Raise secured
term loan20Repay a previous term loan to the extent of5Increase
unsecured loans by10Current liabilities and provisions remain
unchangedAcquire fixed assets worth30Increase its inventories
by10Receivables are expected to increase by15Other Assets would
remain unchangedPay equity dividend10
Solution to Exercise no. 2Projected Cash Flow Statement of
Aditya EnterprisesAmount (Rs. In Lakhs)A) Sources of FundsProfit
Before Interest and tax80Depreciation20Increase in secured
loans20Increase in unsecured loans10Total (A)130B) Disposition /
Application of FundsCapital Expenditure30Increase in Working
Capital25Repayment of Term
Loan5Interest20Taxation30Dividends10Total (B)120Opening balance of
cash in hand and at Bank20Net Surplus / defecit (A-B)10Closing
balance of cash in hand and at Bank30The Balance Sheet of Aditya
Enterprises at the end of year n+1 is as follows:LiabilitiesAmount
(Rs. In Lakhs)AssetsAmount (Rs. In Lakhs)Share Capital100Fixed
Assets190Reserves and Surplus40Investments0Secured Loans95Current
Assets215Unsecured Loans60Cash30Current
Liabilities90Receivables95Provisions20Inventories90Total405Total405
Exercise No. 3Exercise No. 3The Balance Sheet of Swaraj Limited
at the end of year n (the year which is just over) is as
follows:(Rs. In millions)LiabilitiesAmountAssetsAmount (Rs. In
Lakhs)Share Capital5Fixed Assets11Reserves and
Surplus4Investments0.5Secured Loans4Current Assets11.5Unsecured
Loans3Cash1Current
Liabilities6Receivables4Provisions1Inventories6.5Total23Total23The
projected income statement and the distribution of earnings for
year n+1 is given below:ParticularsAmount (Rs. in
millionsSales25Cost of goods sold19Depreciation1.5Profit before
interest and taxes (PBIT)4.5Interest1.2Profit before
tax3.3Tax1.8Profit after tax1.5Dividends1.0Retained
earnings0.50Other information : During n+1, the firm plans
toParticularsAmount (Rs. In millions)Raise a secured term
loan1Repay a previous term loan to the extent of0.5Current
liabilities and provisions would increase by 5 per centAcquire
fixed assets worth1.5Raise its inventories by0.50.5Receivables are
expected to increase by 5 per cent0.2Unsecured loan remains
unchangedGiven the above information, prepare the following:i)
Projected cash flow statementii) Projected balance sheet
Solution to Exercies 3Projected Cash Flow Statement of Swaraj
LimitedAmount (Rs. In millions)A) Sources of FundsProfit Before
Interest and tax4.5Depreciation1.5Increase in secured
loans1Increase in unsecured loans0Increase in Liabilities for
deferred payment0.35Total (A)7.35B) Disposition / Application of
FundsCapital Expenditure1.5Increase in Working Capital0.7Repayment
of Term Loan0.5Interest1.2Taxation1.8Dividends1Total (B)6.7Opening
balance of cash in hand and at Bank1Net Surplus / defecit
(A-B)0.65Closing balance of cash in hand and at Bank1.65The Balance
Sheet of Swaraj Limited at the end of year n+1 is as
follows:LiabilitiesAmount (Rs. In millions)AssetsAmount (Rs. In
millions)Share Capital5Fixed Assets11Reserves and
Surplus4.50Investments0.5Secured Loans4.5Current
Assets12.85Unsecured Loans3Cash1.65Current
Liabilities6.3Receivables4.2Provisions1.05Inventories7Total24.35Total24.3500
Sheet3Net Present ValueCompute NPV @ 20 %, 25 % and 30 % profit
margin. The discount rate is 10 %. The delivery pattern is as
under:Year12345No. of Aircraft1214202535106Solution:Selling
PriceRs.42.01CroresComputation of Cash InflowProfit margin / No. of
Aircraft Year 1Year 2Year 3Year 4Year
5121420253520%100.82117.63168.04210.05294.07890.6125%126.03147.04210.05262.56367.591113.2730%151.24176.44252.06315.08441.111335.92Computation
of NPVDiscount Rate - 10 %Profit Margin 20 %Profit Margin 25
%Profit Margin 30 %Cash Outflow/ InflowPresent value at 10 %Cash
Outflow/ InflowPresent value at 10 %Cash Outflow/ InflowPresent
value at 10 %Discount FactorYear
0-659.46-659.46-659.46-659.46-659.46-659.46Year
1100.8291.66126.03114.57151.24137.490.90991.66114.57137.49Year
2117.6397.21147.04121.52176.44145.820.82697.21121.52145.82Year
3168.04126.25210.05157.81252.06189.380.751126.25157.81189.38Year
4210.05143.47262.56179.33315.08215.200.683143.47179.33215.20Year
5294.07182.59367.59228.24441.11273.890.621182.59228.24273.89Total890.61641.181113.27801.481335.92961.78641.18801.48961.78Net
Present Value-18.28142.02302.32RemarksNegative NPVPositive
NPVPositive NPVDiscount Rate - 15 %Profit Margin 20 %Profit Margin
25 %Profit Margin 30 %Cash Outflow/ InflowPresent value at 15 %Cash
Outflow/ InflowPresent value at 15 %Cash Outflow/ InflowPresent
value at 15 %Year 0-659.46-659.46-659.46-659.46-659.46-659.46Year
1100.8287.67126.03109.59151.24131.510.87087.67109.59131.51Year
2117.6388.94147.04111.18176.44133.420.75688.94111.18133.42Year
3168.04110.49210.05138.11252.06165.730.658110.49138.11165.73Year
4210.05120.10262.56150.12315.08180.150.572120.10150.12180.15Year
5294.07146.20367.59182.76441.11219.310.497146.20182.76219.31Total890.61553.411113.27691.761335.92830.11553.41691.76830.11Net
Present Value-106.0532.30170.65RemarksNegative NPVPositive
NPVPositive NPV
Blank FormatGiven DataCash Outflow : Rs. 659.46 CroresSelling
PriceRs.42.01CroresCompute NPV @ 20 %, 25 % and 30 % profit margin.
The discount rate is 10 %. The delivery pattern is as
under:Year12345No. of Aircraft1214202535Solution:Computation of
Cash InflowRs. In CroresProfit margin / No. of Aircraft Year 1Year
2Year 3Year 4Year
5121420253520%100.82117.63168.04210.05294.07890.6125%126.03147.04210.05262.56367.591113.2730%Computation
of NPVDiscount Rate - 10 %Profit Margin 20 %Profit Margin 25
%Profit Margin 30 %Cash Outflow/ InflowPresent value at 10 %Cash
Outflow/ InflowPresent value at 10 %Cash Outflow/ InflowPresent
value at 10 %Discount FactorYear 0Year 10.9090.000.000.00Year
20.8260.000.000.00Year 30.7510.000.000.00Year
40.6830.000.000.00Year 50.6210.000.000.00Total0.000.000.00Net
Present ValueRemarksDiscount Rate - 15 %Profit Margin 20 %Profit
Margin 25 %Profit Margin 30 %Cash Outflow/ InflowPresent value at
15 %Cash Outflow/ InflowPresent value at 15 %Cash Outflow/
InflowPresent value at 15 %Year 0Year 10.8700.000.000.00Year
20.7560.000.000.00Year 30.6580.000.000.00Year
40.5720.000.000.00Year 50.4970.000.000.00Total0.000.000.00Net
Present ValueRemarks
