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MidTermExamination
PGPII,TermIV
Time:90Minutes,Max.Marks]=25
(Attemptanyfivequestions,allquestionscarryequalmarks)
1. Belowareabalancesheetandanincomestatementthathavebeenreformulated.
BalanceSheet
AssetsLiabilitiesandEquity
2009200820092008
Operatingassets205.3189.9Operatingliabilities40.634.2
Financialassets45.742.0Financialliabilities120.4120.4
Shareholdersequity90.077.3
Total251.0231.9Total251.0231.9
IncomeStatement2009
Operatingrevenues134.5
Operatingexpenses(112.8)
Operatingincome21.7
Interestrevenues2.5
Interestexpenses(9.6)
Comprehensiveincome14.6
A. Howmuchwaspaidoutinnetdividendsduring2009?
B. Whatisfreecashflowfor2009?
C. Whatwasthereturnonnetoperatingassetsin2009?
D. Whatwasthefirmsnetborrowingcost?
2. BigDataLtd.suppliesyouwiththefollowingdetailsasgiventheTable.DetermineitsBasic
EPS(BEPS)andDilutedEPS(DEPS)forboththeyears.Applicabletaxrateis35%.
200607
200506
9.15
6.56
2.00
2.00
20.00lakh
20.00lakh
1.20
0.60
Particulars
Netprofitattributabletoexistingequityshareholders(Rs.InCrores)
No.ofequitysharesoutstanding(FVRs.10)inCrores
No.of6%foreigncurrencyconvertiblebonds(FCCBs),equivalentof
Rs.100each,issuedon1stOctober2005.Eachcompulsorily
convertibleinto5equityshares.
InterestexpenseonFCCBs
3. (a)ChrisTiteraistheChiefFinancialOfficer(CFO)forDallasCompany.ItisJanuary10and
Chrishasjustfinishedcompilingthe preliminaryfinancialresultsforthemostrecentfiscal
yearthatendedonDecember31.ThepreliminaryresultsindicatethatDallaslost$1,00,000
duringtheyear.Dallasisalargecompany(withassetsinexcess$1billion),sothe$1,00,000
lossisessentiallythesameaszero.However,theBoardofDirectorsthinksthatitconveysa
verynegativeimageforDallasCompanytoreportalossforyear,evenifthelossamountis
verysmall.Asaresult,theyhaveinstructedChristolookatnumbersagainandseeifhecan
turnthislossintoaprofit.WhatthingscanChristdo,astheCFO,toturnthislossintoaprofit?
WhatconcernsshouldChrishave?
(b)AttheendofthefiscalyearendingJune30,2003,Microsoftreportedcommonequityof$64.9
billion on its balance sheet, with $49.0 billion invested in financial assets (in the form of cash
equivalentsandshortterminvestments)andnofinancingdebt.Forfiscalyear2004,thefirmreported
$7.4 billion in comprehensive income, of which $1.1 billion was aftertax earnings on the financial
assets.ThismonthMicrosoftisdistributing$34billionoffinancialassetstoshareholdersintheform
ofaspecialdividend.
a. CalculateMicrosoftsreturnoncommonequity(ROCE)for2004.
b. HoldingallelseconstantwhatwouldMicrosoftsROCEbeafterthepayoutof$34billion?
c. Wouldyouexpectthepayouttoincreaseordecreaseearningsgrowthinthefuture?Why?
4. HLtd.Acquiredasinvestment15,000sharesinSLtd.forRs.1,55,000on1stJuly,1999.The
BalanceSheetsofthetwocompanieson31stMarch,2000wereasfollows:
Liabilities
H.Ltd.
SLtd.
Assets
H.Ltd.
SLtd.
Rs.
Rs.
Rs.
Rs.
EquitysharesofRs.10each 9,00,000
fullypaid
2,50,000
Machinery
7,00,000
1,50,000
Generalreserve
1,60,000
40,000
Furniture
1,00,000
70,000
Profit&LossAccount
80,000
25,000
Investment
1,55,000
BillsPayable
40,000
20,000
Stock
1,00,000
50,000
Creditors
50,000
30,000
Debtors
60,000
35,000
CashatBank
90,000
40,000
Billsreceivable
25,000
20,000
Total
12,30,000
3,65,000
12,30,000
3,65,000
Thefollowingadditionalinformationisprovidedtoyou:
(i)
GeneralReserveappearinginthebalancesheetofSLtd.Hasremainedunchangedsince
31stMarch,1999
(ii)
ProfitearnedbySLtd.Fortheyearended31stMarch,2000amountedtoRs.20,000.
(iii)
On1stFebruary,2000HLtd.SoldtoSLtd.GoodscostingRs.8000forRs.10,000.25%of
thesegoodsremainedunsoldwithSLtd.On31stMarch,2000.CreditorsofSLtd.include
Rs.4,000duetoHLtd.Onaccountofthesegoods.
(iv)
OutofSLtdsacceptances,Rs.15000arethosewhichhavebeenacceptedinfavourofH
Ltd.Outofthese,H,Ltd.Hadendorsedby31stMarch,2000Rs.8,000worthofbills
receivableinfavourofitscreditors.
Youarerequiredtodrawaconsolidatedbalancesheetasat31stMarch,2000.
5. The following is the reformulated comparative Balance Sheet for General Mills Inc,. As an
analystyouarerequired togiveinsightintohowafirmorganizesitsbusiness.Further the
operatingincomeaftertaxforthefirmis$1901millionand$1602millionfor2008and2007
respectively.TheNetOperatingassetsfor2006is$5360million.Assumeanexpectednormal
rate of return of 9%. How much is the extra value in terms of Operating income over and
abovethenormalreturniscreatedbyGeneralMillsinc.Commentonit.
(inMillionofDollars)
937
1,483
3,164
OperatingAssets
WorkingCash
Receivables
Inventories
PrepaidExpenses
Land,BuildingandEquipment
Goodwill
Intangibleassets
Deferredtaxassets
Otherassets
Total
OperatingLiabilities
AccountsPayable
DeferredtaxLiabilities
Otherliabilities
NetOperatingassets
NetFinancialObligations:
Currentportionofdebt
NotesPayable
Longtermdebt
CashEquivalents
CommonShareholdersEquity
MinorityInterest(MI)
CommonShareholders'Equity(afterMI)
442
2,209
4,349
611
2008
50
1,082
1,367
511
3,108
6,786
3,777
1,750
18,413
5,584
12,847
6,389
6,458
242
6,218
2007
50
953
1,173
444
3,014
6,835
3,694
67
1,587
17,817
778
1,433
3,309
5,520
12,297
1,734
1,254
3,218
367
5,839
6,458
1,139
5,319
6. FollowingisthecashflowstatementforIBM(giveninthenextpage).Youarerequiredto
analyzethestrategicbusinessactivitiesofthefirmwithrespecttooperational,investment
andfinancingactivities.
($ in millions)
For the year ended December 31:
2013
2012
2011
$16,483
$16,604
$15,855
Depreciation
3,327
3,392
3,589
Amortization of intangibles
1,351
1,284
1,226
614
688
697
(1,610)
797
1,212
(236)
(729)
(342)
Stock-based compensation
Deferred taxes
Net (gain)/loss on asset sales and other
Change in operating assets and liabilities, net of acquisitions/divestitures
(1,407)
(2,230)
(1,279)
Retirement related
294
(1,008)
(1,371)
Inventories
(57)
280
(163)
(747)
733
(28)
Accounts payable
(529)
(224)
451
17,485
19,586
19,846
(4,108)
(3,623)
(4,082)
372
410
608
Investment in software
(517)
(635)
(559)
(4,608)
(4,109)
(1,594)
4,873
3,142
3,345
(1,063)
(608)
(291)
(3,056)
(3,722)
(1,811)
297
599
14
(7,326)
(9,004)
(4,396)
16,353
12,242
9,996
(10,013)
(9,549)
(8,947)
621
(441)
1,321
(13,859)
(11,995)
(15,046)
1,074
1,540
2,453
(4,058)
(3,773)
(3,473)
(9,883)
(11,976)
(13,696)
28
(116)
(493)
304
(1,511)
1,262
10,412
11,922
10,661
$10,716
$10,412
$11,922
$4,024
$3,169
$4,168
$982
$ 1,009
$956
$14
$10
$39
81