Profit & Loss Account

Particulars 1 2 3

Net Sales 180 200 229

Non Operating Income 8

Total Income 180 200 237

Cost of Goods Sold 100 105 125

Selling, General & Administration Exp. 30 35 45
Interest Expenses 12 15 16

Total Cost & Expenses 154 170 204

Profit Before Tax (PBT) 26 30 36

Taxes 8 9 12
Profit After Tax (PAT) 18 21 24
Retained Earnings 7 9 12
 Profit & Loss Account Forecasted
Particulars 1 2 3 4 5 6
115% 115% 115%
Net Sales 180 200 229 262 300 344
Income From Marketable Securities 3 3 2 1
Non Operating Income 8 0 0 0
Total Income 180 200 240 265 302 345

Cost of Goods Sold 100 105 125 143 170 203

Selling, General & Administration Exp. 30 35 45 50 58 66
Depreciation 12 15 18 21 24 27
Interest Expenses 12 15 16 17 18 19
Total Cost & Expenses 154 170 204 231 270 315

Profit Before Tax (PBT) 26 30 36 34 32 29

Taxes 8 9 12 16 21 28
Profit After Tax (PAT) 18 21 24
Dividend 11 12 12
Retained Earnings 7 9 12

Balance Sheet Forecasted

Particulars 1 2 3 4 5 6

Equity Capital 60 90 90
Reserves & Surplus 40 49 61
Debt 100 119 134

Total Liabilities 200 258 285

Fixed Assets 150 175 190

Investments 0 20 25
Net Current Assets 50 63 70

Total Assets 200 258 285

Forecasted
7 8
115% 115%
394 451 1.145
0 0
0 0
394 451

241 287 1.19047619047619

76 87
31 36
21 22 107% 107% 107% 1.066667 1.066667
369 432

25 19
38 50 1.33
133.33%

Forecasted
7 8
 Profit & Loss Account
Particulars 1 2 3

Net Sales 180 200 229

Income From Marketable Securities 3
Non Operating Income 8

Total Income 180 200 240

Cost of Goods Sold 100 105 125

Selling, General & Administration Exp. 30 35 45
Depreciation 12 15 18
Interest Expenses 12 15 16

Total Cost & Expenses 154 170 204

Profit Before Tax (PBT) 26 30 36

Taxes 8 9 12
Profit After Tax (PAT) 18 21 24
Dividend 11 12 12
Retained Earnings 7 9 12
 Balance Sheet
Particulars 1 2 3
Base
Equity Capital 60 90 90 (ADD)
Reserves & Surplus 40 49 61 (Less)
Debt 100 119 134 (Less)
A
Total Liabilities 200 258 285 Base
(Add)
Fixed Assets 150 175 190 (Less)
Investments 0 20 25 (Less)
Net Current Assets 50 63 70
B
Total Assets 200 258 285 (A-B)

Operating Invested Capital

Particulars 1 2 3
Total Assets 200 258 285 A
(Less) Non-Operating Fixed Assets 0 0 0 B
(less) Excess Cash & mark Sec. 0 20 25
Operating Invested Capital (EoY) 200 238 260 (A/B)
Operating Invested Capital (BoY) 200 238
Net Investments ma
Growth rate of Investments
Particulars 1 2 3 Base
Net Investments made during the year 38 22 (Add)
Net Investments at the (BoY) 200 238
(Less)
Growth Rate of Investments 19 9.24 (Less)

Income From Marketable Securities 3 Calculation of

Non Operating Income 8
11 Base
Tax -1.2 (Less)
-3.2
Non-Operating Cash Flows (After Tax) 6.6
Free Cash-Flow

Base
(Add)

(Add)
(Add)
(Add)
(Add)
Total Cash Flows Available to Investor
(Less)
(Less)
Net Cash Flows Availabe to Investors
(Add)
Financing Flow
 NOPLAT
Particulars 1 2 3
Profit Before Tax (PBT) 26 30 36
Interest Expenses 12 15 16
Income From Marketable Securities 0 0 3
Non Operating Income 0 0 8
EBIT (Net Operating Income) 38 45 41
Taxes 8 9 12
Tax shield on interest expense 4.8 6 6.4
Taxes On MS -1.2
Taxes on NOI -3.2

Taxes on EBIT (net Op Income) 12.8 15 14

NOPLAT 25.2 30 27

ROIC (Return on Invested Capital)

Particulars 1 2 3
NOPLAT 25.2 30 27
Invested Capital @ BoY 200 238

ROIC 15 11.34

Net Investments made during the respective year

Particulars 1 2 3
Net Fixed Assets (EoY) 150 175 190
Net Current Assets (EoY) 50 63 70
Total Assets 201 238 260
Net Fixed Assets (BoY) 150 175
Net Current Assets (BoY) 50 63
Net Investments (During Year) 38 22

Calculation of FCF (Free Cash-Flows)

Particulars 1 2 3
NOPLAT 30 27
Net Investments 38 22
FCF -8 5

Free Cash-Flows Available to Investors

Particulars 1 2 3
Free Cash-Flows -8 5
Non-Operating Cash Flows (After Tax) 0 6.6
Total Cash Flows -8 11.6
Dividend Paid 12 12
Share Buy Back 0 0
Redemption of Pref. Sh. 0 0
Increase in Investments 20 5
Total Cash Flows Available to Investors 24 28.6
Increase in Debt 19 15
Increase in Equity 30 0
Net Cash Flows Availabe to Investors -25 13.6
Interest Paid (After Tax) 9 9.6
Financing Flow -16 23.2
ROIC Tree for Year 3
(A) Recognizing The Accounting Statements
1 Operating Invested Capital
2 NOPLAT
3 Return on Invested Capital (ROIC)
4 Net Investment
5 Gross Investement
6 Free Cash Flows (FCF)

(B) Assessing company’s Capital Structure

Interest Coverage
Leverage
Dividend Payout
 Recognizing The Accounting Statements
(Total Assets - Non-Operating Assets - Cash & Marketable Securities)
EBIT - Taxes on EBIT
(NOPLAT / Invested Capital)
Gross Investment - Depreciation
(Net Fixed Assets @EoY + Net Current Assets @ EoY) - (Net Fixed Assets @BoY + Net Current Assets @ EoY)
NOPLAT - Net Investment
Gross Cashflow - Gross Investment

Assessing company’s Capital Structure

Assume a tax rate of 40 percent.
(i) What is the EBIT for year 2?
(ii) What is the tax on EBIT for year 2?
(iii) What is the NOPLAT for year 2?
(iv) What is the free cash fl ow to the fi rm (FCFF) for year 2?
(v) Give the break up of the fi nancing fl ow for year
m (FCFF) for year 2?
ow for year