DSIMS/EXAM/FMT/03/V2.

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Program : MMS Semester: SEMESTER 2

Specialization: FINANCE Subject: ANALYSIS OF FINANCIAL STATEMENT
Date : Marks: 60
Time : 2 hour
INSTRUCTIONS:

1. Attempt overall four questions.

2. Question Number one is compulsory and carries 15 marks.
3. Out of remaining 4 questions answer any 3. Each question carries 15 marks.
4. Use assumptions where ever required.
5. Use Excel where ever required

1. Answer all the questions: - CASE- STUDY…. (Cipla)

a. Comment on the liquidity of the company (All years)

(7.5 MARKS)

b. Comment on the company’s Profitability (All years)

(7.5 MARKS)

2. Answer the following questions:-

a. When examining the financial statements, a note that describes contingencies should be reviewed
closely for possible significant liabilities that are not disclosed on the face of the balance sheet.
Comment. (5 marks)

b. List the two approaches to examining a firm’s long term debt-paying ability. Discuss why each of these
approaches gives an important view of a firm’s ability to carry debt. (5 Marks)

c. Multi step income statement is more convenient than single step Income statement analysis. Discuss.
(5 Marks)
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3. Answer the questions (3X5=15 marks)

The following items are from Line Corporation on 31 March 2015. Assume a flat 40% corporate tax rate
st

on all items.

Sales Rs. 670000

Rental Income 3600
Gain on the sale of Fixed Assets 3000
General & Administrative Expenses 110000
Selling Expenses 97000
Interest Expense 1900
Depreciation for the period 10000
Extraordinary Item (Casualty loss- Pretax) 30000
Cost of Sales 300000
Common stock (30,000 shares outstanding) 150000

Requires:-

a. Prepare a single step income statement

b. Prepare a multi-step income statement
c. Income statements are an important measure of profitability, explain.

4. Answer the following questions

Particulars Patanjalii($) Godrej($) Particulars Patanjalii($) Godrejj($)

Year End Balance Current years Income

sheet Statement

ASSETS

Cash 18500 33000 Sales 660000 780200

Accounts Receivable( 36400 56400 COGS 485100 532500

Net)

Notes Receivable 8100 6200 Interest Expenses 6900 11000

Merchandise Inventory 83440 131500 Income tax expenses 12800 19300

Prepaid expenses 4000 5950 Net Income 67770 105000

Plant & equipment, net 284000 303400 Basic EPS 1.94 2.56

Total Assets 434440 536450

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Liabilities & Beginning of the Year

Stockholders’ Equity Data

Current Liabilities 60340 92300 Accounts receivable, 28800 53200

net

Long term notes 79800 100000 Notes receivables 0 0

payable

Common stock, $5 par 175000 205000 Merchandise 54600 106400

value Inventory

Retained Earnings 119300 139150 TOTAL ASSETS 388000 372500

Total Liabilities & $434440 $536450 Common stock, $5 par 175000 205000
Equities value

Retained Earnings 94300 90600

Required:-
a. Compute the current ratio. Acid test ratio, receivables turnover ratio. Identify the company that
you consider to be the better short term credit risk and explain why ( 7.5 Marks)
b. Assuming that each company paid cash dividends of $1.5 per share and each company’s stock
can be purchased at $25 per share, compute their P/E ratios and dividend yields.( 7.5 marks)

1. Answer the following questions 3X 5= 15 marks)

a. Explain concept of financial leverage with an example

b. What is DuPont Analysis? Give the implication while analysing a company’s performance explain
With an example

c. Wealth creation is the primary objective of any firm; explain this concept with the perspective of
Financial Statement Analysis.

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