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Financial Statement Analysis
SUBMITTED BY:-KAMALPREET KAURASSISTANT PROFESSORGCCBA-42,CHANDIGARHFinancial Statement Analysis
IntroductionThe primary objective of financial reporting is to provide information to present and potential investors and creditors and others in making rational investment, credit and other decisions.Effective decision making requires evaluation of the past performance of companies and assessment of their future prospects.Need of Financial Statement AnalysisMere a glance of the financial accounts of a company does not provide useful information simply because they are raw in nature.The information provided in the financial statements is not an end in itself as no meaningful conclusions can be drawn from these statements alone.A proper analysis and interpretation of financial statement can provide valuable insights into a firms performance.It enables investors and creditors to:Evaluate past performance and financial positionPredict future performanceMeaning of FSAThe term financial analysis also known as analysis and interpretation of financial statements, refers to the process of determining financial strengths and weaknesses of the firm by establishing strategic relationship between the items of the balance sheet, P&L A/c and other operative data.
Concept of FSAIt is the collective name for the tools and techniques that are intended to provide relevant information to decision makers.The purpose of financial analysis is to diagnose the information contained in financial statements so as to judge the profitability and financial soundness of the firm.Just like a doctor examines his patient by recording his body temperature, blood pressure, etc before making his conclusion regarding the illness and before giving his treatment, a financial analyst analyses the financial statements with various tool of analysis before commenting up on the financial health or weakness of an enterprise.Types of Financial AnalysisOn the basis of material used:External AnalysisInternal AnalysisOn the basis of modus operandi:Horizontal AnalysisVertical AnalysisOn the basis of material UsedExternal: It is carried out by outsiders of the business investors, credit agencies, govt agencies, creditors etc. who does not access to internal records of the company depending mainly on published accountsInternal: It is carried out by persons who have access to internal records of the company executives, manager etc by officers appointed by govt or courts in legal litigations etc. under power vested in them. On the basis of modus operandiHorizontal: data relating to more than one-year comparison with other years standard or base year expressed as percentage changes Dynamic analysis.
Vertical: quantitative relationships among various items in statements on a particular date inter firm comparisons inter department comparisons static analysis.
Methods of Financial AnalysisComparative Statements AnalysisCommon-Size Statement AnalysisTrend AnalysisRatio AnalysisFunds Flow AnalysisCash Flow Analysis
Comparative Statement AnalysisComparative financial statements are useful in analyzing the changes over time. They carry data relating to two or more years and facilitate the comparison of an item with previous years and even the future figures may be projected using time series / regression analysis.The two comparative statements are:Balance SheetIncome Statement
IllustrationThe following are the Balance Sheets of a concern for the years 2010 and 2011. Prepare Comparative Balance Sheet and study the financial position of the concern.
Guidelines for interpretation of Comparative Balance SheetThe interpreter is expected to study the following aspects:Current Financial Position and Liquidity PositionSee the Working Capital in both the years. (WC is excess of CAs over CLs)The increase in WC will mean improve in the current financial position of the business.Liquid assets like Cash in hand, cash at bank, Receivables show the liquidity positionLong-term Financial PositionStudy the changes in Fixed assets, long-term liabilities and capitalWise policy will be to finance fixed assets by raising long-term funds.Profitability of the concernThe study of increase or decrease in retained earnings, various reserves and surplus, etc.. will enable to see whether the profitability has improved or not.
Illustration The Income statements of a concern are given for the year ending 31st march, 2010 and 2011. Re-arrange the figures in a comparative form and study the profitability position of the concern.
Guidelines for Interpretation of Income StatementsThe amount of GP should be studiedThe increase or decrease in sales should be compared with the increase or decrease in CGS.The study of operational profitsOperational profits = GP Office &Admn expenses Selling &Distbn ExpensesThe study of Net ProfitsThe increase or decrease in NP will give an idea about the overall profitability of the concern.NP = OP Non-operating exp + Non-operating IncomeAn opinion should be formed about profitability of the concern whether is good or not.
Common-Size Statement AnalysisTaking sales to be equal to 100, all other items in the income statement of a year are expressed as percentages to the sales. In case of balance sheet the total assets are made equal to 100 and all other assets are expressed in relative percentages. The same is the case with liabilities with the total liabilities being 100.
Trend AnalysisIt determines the direction upwards or downwards.Under this analysis the values of an item in different years is expressed in relation to the value in one year called the base year. Taking the value of the item in the base year to be equal to 100 The values of the item in different years are expressed as percentages to this value.
Illustration Calculate the trend percentages from the following figures of X Ltd. taking 2007 as base and interpret them:
Solution:
Ratio AnalysisA ratio is an arithmetic relationship between two figures. Financial ratio analysis is a study of ratios between various items or group of items in financial statements.
Types of RatiosProfitability RatiosActivity Ratios/ Turnover RatiosSolvency Ratios/Leverage RatiosLiquidity RatiosProfitability RatiosEarning Per Share (EPS)Dividend Per Share (DPS)Payout RatioRetention RatioReturn On Capital Employed (ROCE) / Return on Investment (ROI)EPSThis ratio gives the amount of net income per share of common stock. It is one of the most widely-used measures of a companys profitability.
DPSThis ratio gives the amount of dividend per share of common stock. It is one of the most widely-used measures of a companys return to the share holders.
Payout RatioThis ratio indicates what proportion of earning per share has been used for paying dividend.
Retention RatioThese ratios are indicators of the amount of earnings that have been ploughed back in the business.Lower the payout ratio, higher the retained earnings ratio.Retention Ratio = 1- payout
Return on Capital Employed or Return on Investment (ROCE/ROI)Measures the profit which a firm earns on investing a unit of capital. Net Operating Profit before Interest and TaxROCE = --------------------------------------------------------------- 100 Total Capital EmployedIt judges the overall efficiency of a businessBusiness can survive only when the ROCE is more than the cost of capital employedShows whether the capital has been employed fruitfully.
Limitations of financial statement analysisSuffering from the limitations of financial statementsIgnoring qualitative informationIgnoring price level changesDifferent tools of analysisAffected by manipulation/window dressingAffected by personal biasness
CapBudgWSEquity Analysis of a ProjectINPUT SHEET: USER ENTERS ALL BOLD NUMBERSINITIAL INVESTMENTCASHFLOW DETAILSDISCOUNT RATEInitial Investment=$50,000Revenues in year 1=$40,000Approach(1:Direct;2:CAPM)=2Opportunity cost (if any)=$7,484Var. Expenses as % of Rev=50%1. Discount rate =10%Lifetime of the investment10Fixed expenses in year 1=02a. Beta0.9Salvage Value at end of project=$10,000Tax rate on net income=40%b. Riskless rate=8.00%Deprec. method(1:St.line;2:DDB)=2If you do not have the breakdown of fixed and variablec. Market risk premium =5.50%Tax Credit (if any )=10%expenses, input the entire expense as a % of revenues.d. Debt Ratio =30.00%Other invest.(non-depreciable)=0e. Cost of Borrowing =9.00%Discount rate used=10.69%WORKING CAPITALInitial Investment in Work. Cap=$10,000Working Capital as % of Rev=25%Salvageable fraction at end=100%GROWTH RATES12345678910RevenuesDo not enter10.00%10.00%10.00%10.00%0.00%0.00%0.00%0.00%0.00%Fixed ExpensesDo not enter10.00%10.00%10.00%10.00%0.00%0.00%0.00%0.00%0.00%Default: The fixed expense growth rate is set equal to the growth rate in revenues by default.YEAR012345678910INITIAL INVESTMENTInvestment$50,000- Tax Credit$5,000Net Investment$45,000+ Working Cap$10,000+ Opp. Cost$7,484+ Other invest.$0Initial Investment$62,484SALVAGE VALUEEquipment$0$0$0$0$0$0$0$0$0$10,000Working Capital$0$0$0$0$0$0$0$0$0$14,641OPERATING CASHFLOWSLifetime Index1111111111Revenues$40,000$44,000$48,400$53,240$58,564$58,564$58,564$58,564$58,564$58,564-Var. Expenses$20,000$22,000$24,200$26,620$29,282$29,282$29,282$29,282$29,282$29,282- Fixed Expenses$0$0$0$0$0$0$0$0$0$0EBITDA$20,000$22,000$24,200$26,620$29,282$29,282$29,282$29,282$29,282$29,282- Depreciation$10,000$8,000$6,400$5,120$4,096$3,277$2,621$486$0$0EBIT$10,000$14,000$17,800$21,500$25,186$26,005$26,661$28,796$29,282$29,282-Tax$4,000$5,600$7,120$8,600$10,074$10,402$10,664$11,518$11,713$11,713EBIT(1-t)$6,000$8,400$10,680$12,900$15,112$15,603$15,996$17,278$17,569$17,569+ Depreciation$10,000$8,000$6,400$5,120$4,096$3,277$2,621$486$0$0- Work. Cap$0$1,000$1,100$1,210$1,331$0$0$0$0$0NATCF($62,484)$16,000$15,400$15,980$16,810$17,877$18,880$18,618$17,764$17,569$17,569Discount Factor11.106851.22511692251.35602066571.50091147381.66128386481.83879204572.03526697582.25273525222.49344001392.7598640793Discounted CF($62,484)$14,455$12,570$11,784$11,200$10,761$10,268$9,148$7,885$7,046$15,294Investment MeasuresNPV =$47,928IRR =23.55%ROC =60.12%BOOK VALUE & DEPRECIATIONBook Value (beginning)$50,000$40,000$32,000$25,600$20,480$16,384$13,107$10,486$10,000$10,000Depreciation$10,000$8,000$6,400$5,120$4,096$3,277$2,621$486$0$0BV(ending)$50,000$40,000$32,000$25,600$20,480$16,384$13,107$10,486$10,000$10,000$10,000
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Sheet1160000.46400160001244147565902.4YearSLMWDV MethodDepnProfit after DepnDepnProfit after Depn12,9517,0496,4003,60022,9517,0493,8406,16032,9517,0492,3047,699Balance Sheet42,9517,0491,3828,618As on 31 march52,9517,0498309,170Liabilities2010(Rs)2011(Rs)Assets2010(Rs)2011(Rs)Equity Share Capital6,00,0008,00,000Land & Buildings3,70,0002,70,000Reserves & Surplus3,30,0002,22,000Plant & Machinery4,00,0006,00,000Debentures2,00l,0003,00,000Furniture20,00025,000Long-term loans on Mortgage1,50,0002,00,000Other Fixed Assets25,00030,000Bills payable50,00045,000Cash in hand & at Bank20,00080,000Sundry Creditors1,00,0001,20,000Bills Receivables1,50,00090,000Other Current Liabilities5,00010,000Sundry Debtors2,00,0002,50,000Stock2,50,0003,50,000Prepaid Expences2,00014,35,00016,97,00014,35,00016,97,000Effect of Inventory Error on Two PeriodsParticularsIncorrect Ending InventoryCorrect Ending Inventory2006200720062007Net SalesRs 1,00,000Rs 1,00,000Rs 1,00,000Rs 1,00,000Cost of Goods Sold:Opening Inventory20,00025,00020,00015,000Purchases85,00065,00085,00065,000Cost of Goods available for sale1,05,00090,0001,05,00080,000Less: Closing Inventory25,00010,00015,00010,000Cost of Goods Sold:80,00080,00090,00070,000Gross Profit (Sales - CGS)20,00020,00010,00030,000Operating Expenses4,0005,0004,0005,000Net Profit16,00015,0006,00025,000
Sheet2HORIZONTAL ANALYSIS HINDUSTAN LEVER LIMITED: Comparative Profit and Loss Account For the year ended December 31PARTICULARS20022001Increase (Decrease)%SALES9954,85.301066,55.69(712,70.39)-6.68Other Income384,54.22381,79.052,75.170.72Total Revenue10339,39.5211049,34.74(709,95.22)-6.43Expenses8142,27.969105,97.52(963,69.56-10.58profit before Tax2197,11.561943,37.22253,74.3413.06Tax479,85.00402,42.0077,43.0019.24Profit after tax1717,26.561540,95.22176,31.3411.44Exceptional items38,41.90100,36.13(61,94.23)-61.72Net profit1755,68.461641,31.35114,37.116.97020022001Increase(decrease)%Shareholder's Funds and Liabilities220,12.44220,12.4400Share CapitalReserve and SurplusSecured LoansUnsecured LoansCurrent Liabilities and ProvisionsDeferred Tax LiabilitiesTotal Funds
Sheet3Balance SheetAs on 31st DecemeberLiabilities2006 (Rs.)2007 (Rs.)Assets2006 (Rs.)2007 (Rs.)Equity Share Capital6,00,0008,00,000Land & Buildings3,70,0002,70,000Reserves & Surplus3,30,0002,22,000Plant & Machinery4,00,0006,00,000Debentures2,00l,0003,00,000Furniture20,00025,000Long-term loans on Mortgage1,50,0002,00,000Other Fixed Assets25,00030,000Bills payable50,000.0045,000Cash in hand & at Bank20,00080,000Sundry Creditors1,00,0001,20,000Bills Receivables1,50,00090,000Other Current Liabilities5,000.0010,000Sundry Debtors2,00,0002,50,000Stock2,50,0003,50,000Prepaid Expences2,0000.0
CapBudgWSEquity Analysis of a ProjectINPUT SHEET: USER ENTERS ALL BOLD NUMBERSINITIAL INVESTMENTCASHFLOW DETAILSDISCOUNT RATEInitial Investment=$50,000Revenues in year 1=$40,000Approach(1:Direct;2:CAPM)=2Opportunity cost (if any)=$7,484Var. Expenses as % of Rev=50%1. Discount rate =10%Lifetime of the investment10Fixed expenses in year 1=02a. Beta0.9Salvage Value at end of project=$10,000Tax rate on net income=40%b. Riskless rate=8.00%Deprec. method(1:St.line;2:DDB)=2If you do not have the breakdown of fixed and variablec. Market risk premium =5.50%Tax Credit (if any )=10%expenses, input the entire expense as a % of revenues.d. Debt Ratio =30.00%Other invest.(non-depreciable)=0e. Cost of Borrowing =9.00%Discount rate used=10.69%WORKING CAPITALInitial Investment in Work. Cap=$10,000Working Capital as % of Rev=25%Salvageable fraction at end=100%GROWTH RATES12345678910RevenuesDo not enter10.00%10.00%10.00%10.00%0.00%0.00%0.00%0.00%0.00%Fixed ExpensesDo not enter10.00%10.00%10.00%10.00%0.00%0.00%0.00%0.00%0.00%Default: The fixed expense growth rate is set equal to the growth rate in revenues by default.YEAR012345678910INITIAL INVESTMENTInvestment$50,000- Tax Credit$5,000Net Investment$45,000+ Working Cap$10,000+ Opp. Cost$7,484+ Other invest.$0Initial Investment$62,484SALVAGE VALUEEquipment$0$0$0$0$0$0$0$0$0$10,000Working Capital$0$0$0$0$0$0$0$0$0$14,641OPERATING CASHFLOWSLifetime Index1111111111Revenues$40,000$44,000$48,400$53,240$58,564$58,564$58,564$58,564$58,564$58,564-Var. Expenses$20,000$22,000$24,200$26,620$29,282$29,282$29,282$29,282$29,282$29,282- Fixed Expenses$0$0$0$0$0$0$0$0$0$0EBITDA$20,000$22,000$24,200$26,620$29,282$29,282$29,282$29,282$29,282$29,282- Depreciation$10,000$8,000$6,400$5,120$4,096$3,277$2,621$486$0$0EBIT$10,000$14,000$17,800$21,500$25,186$26,005$26,661$28,796$29,282$29,282-Tax$4,000$5,600$7,120$8,600$10,074$10,402$10,664$11,518$11,713$11,713EBIT(1-t)$6,000$8,400$10,680$12,900$15,112$15,603$15,996$17,278$17,569$17,569+ Depreciation$10,000$8,000$6,400$5,120$4,096$3,277$2,621$486$0$0- Work. Cap$0$1,000$1,100$1,210$1,331$0$0$0$0$0NATCF($62,484)$16,000$15,400$15,980$16,810$17,877$18,880$18,618$17,764$17,569$17,569Discount Factor11.106851.22511692251.35602066571.50091147381.66128386481.83879204572.03526697582.25273525222.49344001392.7598640793Discounted CF($62,484)$14,455$12,570$11,784$11,200$10,761$10,268$9,148$7,885$7,046$15,294Investment MeasuresNPV =$47,928IRR =23.55%ROC =60.12%BOOK VALUE & DEPRECIATIONBook Value (beginning)$50,000$40,000$32,000$25,600$20,480$16,384$13,107$10,486$10,000$10,000Depreciation$10,000$8,000$6,400$5,120$4,096$3,277$2,621$486$0$0BV(ending)$50,000$40,000$32,000$25,600$20,480$16,384$13,107$10,486$10,000$10,000$10,000
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Sheet1160000.46400160001244147565902.4YearSLMWDV MethodDepnProfit after DepnDepnProfit after Depn12,9517,0496,4003,600Comparative Balance Sheet of a Company22,9517,0493,8406,160for the year ending 31march 2010-201132,9517,0492,3047,699Balance Sheet42,9517,0491,3828,618As on 31st DecemeberYear ending 31 marchIncrease/Decrease (Amount) RsIncrease/Decrease (%)52,9517,0498309,170Liabilities2006 (Rs.)2007 (Rs.)Assets2006 (Rs.)2007 (Rs.)2010(Rs)2011Equity Share Capital6,00,0008,00,000Land & Buildings3,70,0002,70,000ASSETSReserves & Surplus3,30,0002,22,000Plant & Machinery4,00,0006,00,000Current Assets:Debentures2,00l,0003,00,000Furniture20,00025,000Cash in hand & at Bank20,00080,00060,000300Long-term loans on Mortgage1,50,0002,00,000Other Fixed Assets25,00030,000Bills Receivables1,50,00090,000-60,000-40Bills payable50,00045,000Cash in hand & at Bank20,00080,000Sundry Debtors2,00,0002,50,000$50,00025Sundry Creditors1,00,0001,20,000Bills Receivables1,50,00090,000Stock2,50,0003,50,0001,00,00040Other Current Liabilities5,00010,000Sundry Debtors2,00,0002,50,000Prepaid Expences2,0002,000Stock2,50,0003,50,000Total Current Assets6,20,0007,72,0001,52,00024.52Prepaid Expences2,000Fixed Assets:14,35,00016,97,00014,35,00016,97,000Land & Buildings3,70,0002,70,000- 1,00,000-27.03Plant & Machinery4,00,0006,00,0002,00,00050Furniture20,00025,0005,00025Other Fixed Assets25,00030,0005,00020Total Fixed Assets8,15,0009,25,0001,10,00013.49Total Assets14,35,00016,97,0002,62,00018.26LIABILITIES & CAPITALCurrent Liabilities:Bills payable50,00045,000-5,000-10Sundry Creditors1,00,0001,20,00020,00020Other Current Liabilities5,00010,0005,000100Total Current Liabilities1,55,0001,75,00020,00012.9Debentures2,00l,0003,00,0001,00,00050Long-term loans on Mortgage1,50,0002,00,00050,00033Total Liabilities5,05,0006,75,0001,70,00033.66Effect of Inventory Error on Two PeriodsEquity Share Capital6,00,0008,00,0002,00,00033Reserves & Surplus3,30,0002,22,000-1,08,000-32.73ParticularsIncorrect Ending InventoryCorrect Ending InventoryTotal14,35,00016,97,0002,62,00018.262006200720062007Net SalesRs 1,00,000Rs 1,00,000Rs 1,00,000Rs 1,00,000Cost of Goods Sold:Opening Inventory20,00025,00020,00015,000Purchases85,00065,00085,00065,000Cost of Goods available for sale1,05,00090,0001,05,00080,000Less: Closing Inventory25,00010,00015,00010,000Cost of Goods Sold:80,00080,00090,00070,000Gross Profit (Sales - CGS)20,00020,00010,00030,000Operating Expenses4,0005,0004,0005,000Net Profit16,00015,0006,00025,000
Sheet2HORIZONTAL ANALYSIS HINDUSTAN LEVER LIMITED: Comparative Profit and Loss Account For the year ended December 31PARTICULARS20022001Increase (Decrease)%SALES9954,85.301066,55.69(712,70.39)-6.68Other Income384,54.22381,79.052,75.170.72Total Revenue10339,39.5211049,34.74(709,95.22)-6.43Expenses8142,27.969105,97.52(963,69.56-10.58profit before Tax2197,11.561943,37.22253,74.3413.06Tax479,85.00402,42.0077,43.0019.24Profit after tax1717,26.561540,95.22176,31.3411.44Exceptional items38,41.90100,36.13(61,94.23)-61.72Net profit1755,68.461641,31.35114,37.116.97020022001Increase(decrease)%Shareholder's Funds and Liabilities220,12.44220,12.4400Share CapitalReserve and SurplusSecured LoansUnsecured LoansCurrent Liabilities and ProvisionsDeferred Tax LiabilitiesTotal Funds
Sheet3Balance SheetAs on 31st DecemeberLiabilities2006 (Rs.)2007 (Rs.)Assets2006 (Rs.)2007 (Rs.)Equity Share Capital6,00,0008,00,000Land & Buildings3,70,0002,70,000Reserves & Surplus3,30,0002,22,000Plant & Machinery4,00,0006,00,000Debentures2,00l,0003,00,000Furniture20,00025,000Long-term loans on Mortgage1,50,0002,00,000Other Fixed Assets25,00030,000Bills payable50,000.0045,000Cash in hand & at Bank20,00080,000Sundry Creditors1,00,0001,20,000Bills Receivables1,50,00090,000Other Current Liabilities5,000.0010,000Sundry Debtors2,00,0002,50,000Stock2,50,0003,50,000Prepaid Expences2,0000.0
CapBudgWSEquity Analysis of a ProjectINPUT SHEET: USER ENTERS ALL BOLD NUMBERSINITIAL INVESTMENTCASHFLOW DETAILSDISCOUNT RATEInitial Investment=$50,000Revenues in year 1=$40,000Approach(1:Direct;2:CAPM)=2Opportunity cost (if any)=$7,484Var. Expenses as % of Rev=50%1. Discount rate =10%Lifetime of the investment10Fixed expenses in year 1=02a. Beta0.9Salvage Value at end of project=$10,000Tax rate on net income=40%b. Riskless rate=8.00%Deprec. method(1:St.line;2:DDB)=2If you do not have the breakdown of fixed and variablec. Market risk premium =5.50%Tax Credit (if any )=10%expenses, input the entire expense as a % of revenues.d. Debt Ratio =30.00%Other invest.(non-depreciable)=0e. Cost of Borrowing =9.00%Discount rate used=10.69%WORKING CAPITALInitial Investment in Work. Cap=$10,000Working Capital as % of Rev=25%Salvageable fraction at end=100%GROWTH RATES12345678910RevenuesDo not enter10.00%10.00%10.00%10.00%0.00%0.00%0.00%0.00%0.00%Fixed ExpensesDo not enter10.00%10.00%10.00%10.00%0.00%0.00%0.00%0.00%0.00%Default: The fixed expense growth rate is set equal to the growth rate in revenues by default.YEAR012345678910INITIAL INVESTMENTInvestment$50,000- Tax Credit$5,000Net Investment$45,000+ Working Cap$10,000+ Opp. Cost$7,484+ Other invest.$0Initial Investment$62,484SALVAGE VALUEEquipment$0$0$0$0$0$0$0$0$0$10,000Working Capital$0$0$0$0$0$0$0$0$0$14,641OPERATING CASHFLOWSLifetime Index1111111111Revenues$40,000$44,000$48,400$53,240$58,564$58,564$58,564$58,564$58,564$58,564-Var. Expenses$20,000$22,000$24,200$26,620$29,282$29,282$29,282$29,282$29,282$29,282- Fixed Expenses$0$0$0$0$0$0$0$0$0$0EBITDA$20,000$22,000$24,200$26,620$29,282$29,282$29,282$29,282$29,282$29,282- Depreciation$10,000$8,000$6,400$5,120$4,096$3,277$2,621$486$0$0EBIT$10,000$14,000$17,800$21,500$25,186$26,005$26,661$28,796$29,282$29,282-Tax$4,000$5,600$7,120$8,600$10,074$10,402$10,664$11,518$11,713$11,713EBIT(1-t)$6,000$8,400$10,680$12,900$15,112$15,603$15,996$17,278$17,569$17,569+ Depreciation$10,000$8,000$6,400$5,120$4,096$3,277$2,621$486$0$0- Work. Cap$0$1,000$1,100$1,210$1,331$0$0$0$0$0NATCF($62,484)$16,000$15,400$15,980$16,810$17,877$18,880$18,618$17,764$17,569$17,569Discount Factor11.106851.22511692251.35602066571.50091147381.66128386481.83879204572.03526697582.25273525222.49344001392.7598640793Discounted CF($62,484)$14,455$12,570$11,784$11,200$10,761$10,268$9,148$7,885$7,046$15,294Investment MeasuresNPV =$47,928IRR =23.55%ROC =60.12%BOOK VALUE & DEPRECIATIONBook Value (beginning)$50,000$40,000$32,000$25,600$20,480$16,384$13,107$10,486$10,000$10,000Depreciation$10,000$8,000$6,400$5,120$4,096$3,277$2,621$486$0$0BV(ending)$50,000$40,000$32,000$25,600$20,480$16,384$13,107$10,486$10,000$10,000$10,000
&C&"Times"&12CAPITAL BUDGETING WORKSHEET&R&P
Sheet1160000.46400160001244147565902.4YearSLMWDV MethodDepnProfit after DepnDepnProfit after Depn12,9517,0496,4003,600Comparative Balance Sheet of a Company22,9517,0493,8406,160for the year ending December 31, 2006 and 200732,9517,0492,3047,699Balance Sheet42,9517,0491,3828,618As on 31st DecemeberYear ending 31 Dec.Increase/Decrease (Amount) RsIncrease/Decrease (%)52,9517,0498309,170Liabilities2006 (Rs.)2007 (Rs.)Assets2006 (Rs.)2007 (Rs.)2006 (Rs)2007(Rs)Equity Share Capital6,00,0008,00,000Land & Buildings3,70,0002,70,000ASSETS2010 Rs.(000)2011 Rs.(000)Reserves & Surplus3,30,0002,22,000Plant & Machinery4,00,0006,00,000Current Assets:Net Sales785900Debentures2,00l,0003,00,000Furniture20,00025,000Cash in hand & at Bank20,00080,00060,000300Cost of Goods Sold450500Long-term loans on Mortgage1,50,0002,00,000Other Fixed Assets25,00030,000Bills Receivables1,50,00090,000-60,000-40Operating Expenses:Bills payable50,00045,000Cash in hand & at Bank20,00080,000Sundry Debtors2,00,0002,50,000$50,00025General and Admn Expenses7072Sundry Creditors1,00,0001,20,000Bills Receivables1,50,00090,000Stock2,50,0003,50,0001,00,00040selling Expenses8090Other Current Liabilities5,00010,000Sundry Debtors2,00,0002,50,000Prepaid Expences2,0002,000Non-operating Expenses:Stock2,50,0003,50,000Total Current Assets6,20,0007,72,0001,52,00024.52Interest paid2530Prepaid Expences2,000Fixed Assets:Income-Tax708014,35,00016,97,00014,35,00016,97,000Land & Buildings3,70,0002,70,000- 1,00,000-27.03Plant & Machinery4,00,0006,00,0002,00,00050Furniture20,00025,0005,00025Other Fixed Assets25,00030,0005,00020Total Fixed Assets8,15,0009,25,0001,10,00013.49Total Assets14,35,00016,97,0002,62,00018.26LIABILITIES & CAPITALCurrent Liabilities:Bills payable50,00045,000-5,000-10Sundry Creditors1,00,0001,20,00020,00020Other Current Liabilities5,00010,0005,000100Total Current Liabilities1,55,0001,75,00020,00012.9Debentures2,00l,0003,00,0001,00,00050Long-term loans on Mortgage1,50,0002,00,00050,00033Total Liabilities5,05,0006,75,0001,70,00033.66Effect of Inventory Error on Two PeriodsEquity Share Capital6,00,0008,00,0002,00,00033Reserves & Surplus3,30,0002,22,000-1,08,000-32.73ParticularsIncorrect Ending InventoryCorrect Ending InventoryTotal14,35,00016,97,0002,62,00018.262006200720062007Net SalesRs 1,00,000Rs 1,00,000Rs 1,00,000Rs 1,00,000Cost of Goods Sold:Opening Inventory20,00025,00020,00015,000Purchases85,00065,00085,00065,000Cost of Goods available for sale1,05,00090,0001,05,00080,000Less: Closing Inventory25,00010,00015,00010,000Cost of Goods Sold:80,00080,00090,00070,000Gross Profit (Sales - CGS)20,00020,00010,00030,000Operating Expenses4,0005,0004,0005,000Net Profit16,00015,0006,00025,000
Sheet2HORIZONTAL ANALYSIS HINDUSTAN LEVER LIMITED: Comparative Profit and Loss Account For the year ended December 31PARTICULARS20022001Increase (Decrease)%SALES9954,85.301066,55.69(712,70.39)-6.68Other Income384,54.22381,79.052,75.170.72Total Revenue10339,39.5211049,34.74(709,95.22)-6.43Expenses8142,27.969105,97.52(963,69.56-10.58profit before Tax2197,11.561943,37.22253,74.3413.06Tax479,85.00402,42.0077,43.0019.24Profit after tax1717,26.561540,95.22176,31.3411.44Exceptional items38,41.90100,36.13(61,94.23)-61.72Net profit1755,68.461641,31.35114,37.116.97020022001Increase(decrease)%Shareholder's Funds and Liabilities220,12.44220,12.4400Share CapitalReserve and SurplusSecured LoansUnsecured LoansCurrent Liabilities and ProvisionsDeferred Tax LiabilitiesTotal Funds
Sheet3Balance SheetAs on 31st DecemeberLiabilities2006 (Rs.)2007 (Rs.)Assets2006 (Rs.)2007 (Rs.)Equity Share Capital6,00,0008,00,000Land & Buildings3,70,0002,70,000Reserves & Surplus3,30,0002,22,000Plant & Machinery4,00,0006,00,000Debentures2,00l,0003,00,000Furniture20,00025,000Long-term loans on Mortgage1,50,0002,00,000Other Fixed Assets25,00030,000Bills payable50,000.0045,000Cash in hand & at Bank20,00080,000Sundry Creditors1,00,0001,20,000Bills Receivables1,50,00090,000Other Current Liabilities5,000.0010,000Sundry Debtors2,00,0002,50,000Stock2,50,0003,50,000Prepaid Expences2,0000.0
CapBudgWSEquity Analysis of a ProjectINPUT SHEET: USER ENTERS ALL BOLD NUMBERSINITIAL INVESTMENTCASHFLOW DETAILSDISCOUNT RATEInitial Investment=$50,000Revenues in year 1=$40,000Approach(1:Direct;2:CAPM)=2Opportunity cost (if any)=$7,484Var. Expenses as % of Rev=50%1. Discount rate =10%Lifetime of the investment10Fixed expenses in year 1=02a. Beta0.9Salvage Value at end of project=$10,000Tax rate on net income=40%b. Riskless rate=8.00%Deprec. method(1:St.line;2:DDB)=2If you do not have the breakdown of fixed and variablec. Market risk premium =5.50%Tax Credit (if any )=10%expenses, input the entire expense as a % of revenues.d. Debt Ratio =30.00%Other invest.(non-depreciable)=0e. Cost of Borrowing =9.00%Discount rate used=10.69%WORKING CAPITALInitial Investment in Work. Cap=$10,000Working Capital as % of Rev=25%Salvageable fraction at end=100%GROWTH RATES12345678910RevenuesDo not enter10.00%10.00%10.00%10.00%0.00%0.00%0.00%0.00%0.00%Fixed ExpensesDo not enter10.00%10.00%10.00%10.00%0.00%0.00%0.00%0.00%0.00%Default: The fixed expense growth rate is set equal to the growth rate in revenues by default.YEAR012345678910INITIAL INVESTMENTInvestment$50,000- Tax Credit$5,000Net Investment$45,000+ Working Cap$10,000+ Opp. Cost$7,484+ Other invest.$0Initial Investment$62,484SALVAGE VALUEEquipment$0$0$0$0$0$0$0$0$0$10,000Working Capital$0$0$0$0$0$0$0$0$0$14,641OPERATING CASHFLOWSLifetime Index1111111111Revenues$40,000$44,000$48,400$53,240$58,564$58,564$58,564$58,564$58,564$58,564-Var. Expenses$20,000$22,000$24,200$26,620$29,282$29,282$29,282$29,282$29,282$29,282- Fixed Expenses$0$0$0$0$0$0$0$0$0$0EBITDA$20,000$22,000$24,200$26,620$29,282$29,282$29,282$29,282$29,282$29,282- Depreciation$10,000$8,000$6,400$5,120$4,096$3,277$2,621$486$0$0EBIT$10,000$14,000$17,800$21,500$25,186$26,005$26,661$28,796$29,282$29,282-Tax$4,000$5,600$7,120$8,600$10,074$10,402$10,664$11,518$11,713$11,713EBIT(1-t)$6,000$8,400$10,680$12,900$15,112$15,603$15,996$17,278$17,569$17,569+ Depreciation$10,000$8,000$6,400$5,120$4,096$3,277$2,621$486$0$0- Work. Cap$0$1,000$1,100$1,210$1,331$0$0$0$0$0NATCF($62,484)$16,000$15,400$15,980$16,810$17,877$18,880$18,618$17,764$17,569$17,569Discount Factor11.106851.22511692251.35602066571.50091147381.66128386481.83879204572.03526697582.25273525222.49344001392.7598640793Discounted CF($62,484)$14,455$12,570$11,784$11,200$10,761$10,268$9,148$7,885$7,046$15,294Investment MeasuresNPV =$47,928IRR =23.55%ROC =60.12%BOOK VALUE & DEPRECIATIONBook Value (beginning)$50,000$40,000$32,000$25,600$20,480$16,384$13,107$10,486$10,000$10,000Depreciation$10,000$8,000$6,400$5,120$4,096$3,277$2,621$486$0$0BV(ending)$50,000$40,000$32,000$25,600$20,480$16,384$13,107$10,486$10,000$10,000$10,000
&C&"Times"&12CAPITAL BUDGETING WORKSHEET&R&P
Sheet1160000.46400160001244147565902.4YearSLMWDV MethodDepnProfit after DepnDepnProfit after Depn12,9517,0496,4003,600Comparative Balance Sheet of a Company22,9517,0493,8406,160for the year ending December 31, 2006 and 200732,9517,0492,3047,699Balance Sheet42,9517,0491,3828,618As on 31st DecemeberYear ending 31 Dec.Increase/Decrease (Amount) RsIncrease/Decrease (%)52,9517,0498309,170Liabilities2006 (Rs.)2007 (Rs.)Assets2006 (Rs.)2007 (Rs.)2006 (Rs)2007(Rs)Equity Share Capital6,00,0008,00,000Land & Buildings3,70,0002,70,000ASSETS2006 Rs.(000)2007 Rs.(000)Reserves & Surplus3,30,0002,22,000Plant & Machinery4,00,0006,00,000Current Assets:Net Sales785900Debentures2,00l,0003,00,000Furniture20,00025,000Cash in hand & at Bank20,00080,00060,000300Cost of Goods Sold450500Long-term loans on Mortgage1,50,0002,00,000Other Fixed Assets25,00030,000Bills Receivables1,50,00090,000-60,000-40Operating Expenses:Bills payable50,00045,000Cash in hand & at Bank20,00080,000Sundry Debtors2,00,0002,50,000$50,00025General and Admn Expenses7072Sundry Creditors1,00,0001,20,000Bills Receivables1,50,00090,000Stock2,50,0003,50,0001,00,00040selling Expenses8090Other Current Liabilities5,00010,000Sundry Debtors2,00,0002,50,000Prepaid Expences2,0002,000Non-operating Expenses:Stock2,50,0003,50,000Total Current Assets6,20,0007,72,0001,52,00024.52Interest paid2530Prepaid Expences2,000Fixed Assets:Income-Tax708014,35,00016,97,00014,35,00016,97,000Land & Buildings3,70,0002,70,000- 1,00,000-27.03Plant & Machinery4,00,0006,00,0002,00,00050Furniture20,00025,0005,00025Other Fixed Assets25,00030,0005,00020Total Fixed Assets8,15,0009,25,0001,10,00013.49Total Assets14,35,00016,97,0002,62,00018.26LIABILITIES & CAPITALCurrent Liabilities:Bills payable50,00045,000-5,000-10Sundry Creditors1,00,0001,20,00020,00020Other Current Liabilities5,00010,0005,000100Total Current Liabilities1,55,0001,75,00020,00012.9Debentures2,00l,0003,00,0001,00,00050Long-term loans on Mortgage1,50,0002,00,00050,00033Total Liabilities5,05,0006,75,0001,70,00033.66Effect of Inventory Error on Two PeriodsEquity Share Capital6,00,0008,00,0002,00,00033Reserves & Surplus3,30,0002,22,000-1,08,000-32.73ParticularsIncorrect Ending InventoryCorrect Ending InventoryTotal14,35,00016,97,0002,62,00018.262006200720062007Net SalesRs 1,00,000Rs 1,00,000Rs 1,00,000Rs 1,00,000Cost of Goods Sold:Opening Inventory20,00025,00020,00015,000Purchases85,00065,00085,00065,000Comparative Income StatementCost of Goods available for sale1,05,00090,0001,05,00080,000for the year ending march 31, 2010 and 2011Less: Closing Inventory25,00010,00015,00010,000Cost of Goods Sold:80,00080,00090,00070,000Year ending 31 march.Increase/Decrease (Amount) RsIncrease/Decrease (%)Gross Profit (Sales - CGS)20,00020,00010,00030,0002010(Rs)2011(Rs)Operating Expenses4,0005,0004,0005,000Net Sales78590011514.65Net Profit16,00015,0006,00025,000Less: Cost of Goods Sold4505005011.11Gross Profit3354006519.40Operating Expenses:General and Admn Expenses707222.86selling Expenses80901012.50Total Operating Expenses150162128.00Operating Profit1852385328.65Less: Non-operating Expenses:Interest paid2530520.00Net Profit before Tax1602084830.00Less: Income-Tax70801014.29Net Profit after-tax901283842.22
Sheet2HORIZONTAL ANALYSIS HINDUSTAN LEVER LIMITED: Comparative Profit and Loss Account For the year ended December 31PARTICULARS20022001Increase (Decrease)%SALES9954,85.301066,55.69(712,70.39)-6.68Other Income384,54.22381,79.052,75.170.72Total Revenue10339,39.5211049,34.74(709,95.22)-6.43Expenses8142,27.969105,97.52(963,69.56-10.58profit before Tax2197,11.561943,37.22253,74.3413.06Tax479,85.00402,42.0077,43.0019.24Profit after tax1717,26.561540,95.22176,31.3411.44Exceptional items38,41.90100,36.13(61,94.23)-61.72Net profit1755,68.461641,31.35114,37.116.97020022001Increase(decrease)%Shareholder's Funds and Liabilities220,12.44220,12.4400Share CapitalReserve and SurplusSecured LoansUnsecured LoansCurrent Liabilities and ProvisionsDeferred Tax LiabilitiesTotal Funds
Sheet3Balance SheetAs on 31st DecemeberLiabilities2006 (Rs.)2007 (Rs.)Assets2006 (Rs.)2007 (Rs.)Equity Share Capital6,00,0008,00,000Land & Buildings3,70,0002,70,000Reserves & Surplus3,30,0002,22,000Plant & Machinery4,00,0006,00,000Debentures2,00l,0003,00,000Furniture20,00025,000Long-term loans on Mortgage1,50,0002,00,000Other Fixed Assets25,00030,000Bills payable50,000.0045,000Cash in hand & at Bank20,00080,000Sundry Creditors1,00,0001,20,000Bills Receivables1,50,00090,000Other Current Liabilities5,000.0010,000Sundry Debtors2,00,0002,50,000Stock2,50,0003,50,000Prepaid Expences2,0000.0
CapBudgWSEquity Analysis of a ProjectINPUT SHEET: USER ENTERS ALL BOLD NUMBERSINITIAL INVESTMENTCASHFLOW DETAILSDISCOUNT RATEInitial Investment=$50,000Revenues in year 1=$40,000Approach(1:Direct;2:CAPM)=2Opportunity cost (if any)=$7,484Var. Expenses as % of Rev=50%1. Discount rate =10%Lifetime of the investment10Fixed expenses in year 1=02a. Beta0.9Salvage Value at end of project=$10,000Tax rate on net income=40%b. Riskless rate=8.00%Deprec. method(1:St.line;2:DDB)=2If you do not have the breakdown of fixed and variablec. Market risk premium =5.50%Tax Credit (if any )=10%expenses, input the entire expense as a % of revenues.d. Debt Ratio =30.00%Other invest.(non-depreciable)=0e. Cost of Borrowing =9.00%Discount rate used=10.69%WORKING CAPITALInitial Investment in Work. Cap=$10,000Working Capital as % of Rev=25%Salvageable fraction at end=100%GROWTH RATES12345678910RevenuesDo not enter10.00%10.00%10.00%10.00%0.00%0.00%0.00%0.00%0.00%Fixed ExpensesDo not enter10.00%10.00%10.00%10.00%0.00%0.00%0.00%0.00%0.00%Default: The fixed expense growth rate is set equal to the growth rate in revenues by default.YEAR012345678910INITIAL INVESTMENTInvestment$50,000- Tax Credit$5,000Net Investment$45,000+ Working Cap$10,000+ Opp. Cost$7,484+ Other invest.$0Initial Investment$62,484SALVAGE VALUEEquipment$0$0$0$0$0$0$0$0$0$10,000Working Capital$0$0$0$0$0$0$0$0$0$14,641OPERATING CASHFLOWSLifetime Index1111111111Revenues$40,000$44,000$48,400$53,240$58,564$58,564$58,564$58,564$58,564$58,564-Var. Expenses$20,000$22,000$24,200$26,620$29,282$29,282$29,282$29,282$29,282$29,282- Fixed Expenses$0$0$0$0$0$0$0$0$0$0EBITDA$20,000$22,000$24,200$26,620$29,282$29,282$29,282$29,282$29,282$29,282- Depreciation$10,000$8,000$6,400$5,120$4,096$3,277$2,621$486$0$0EBIT$10,000$14,000$17,800$21,500$25,186$26,005$26,661$28,796$29,282$29,282-Tax$4,000$5,600$7,120$8,600$10,074$10,402$10,664$11,518$11,713$11,713EBIT(1-t)$6,000$8,400$10,680$12,900$15,112$15,603$15,996$17,278$17,569$17,569+ Depreciation$10,000$8,000$6,400$5,120$4,096$3,277$2,621$486$0$0- Work. Cap$0$1,000$1,100$1,210$1,331$0$0$0$0$0NATCF($62,484)$16,000$15,400$15,980$16,810$17,877$18,880$18,618$17,764$17,569$17,569Discount Factor11.106851.22511692251.35602066571.50091147381.66128386481.83879204572.03526697582.25273525222.49344001392.7598640793Discounted CF($62,484)$14,455$12,570$11,784$11,200$10,761$10,268$9,148$7,885$7,046$15,294Investment MeasuresNPV =$47,928IRR =23.55%ROC =60.12%BOOK VALUE & DEPRECIATIONBook Value (beginning)$50,000$40,000$32,000$25,600$20,480$16,384$13,107$10,486$10,000$10,000Depreciation$10,000$8,000$6,400$5,120$4,096$3,277$2,621$486$0$0BV(ending)$50,000$40,000$32,000$25,600$20,480$16,384$13,107$10,486$10,000$10,000$10,000
&C&"Times"&12CAPITAL BUDGETING WORKSHEET&R&P
Sheet1160000.46400160001244147565902.4YearSLMWDV MethodDepnProfit after DepnDepnProfit after Depn12,9517,0496,4003,600Comparative Balance Sheet of a Company22,9517,0493,8406,160for the year ending December 31, 2006 and 200732,9517,0492,3047,699Balance Sheet42,9517,0491,3828,618As on 31st DecemeberYear ending 31 Dec.Increase/Decrease (Amount) RsIncrease/Decrease (%)52,9517,0498309,170Liabilities2006 (Rs.)2007 (Rs.)Assets2006 (Rs.)2007 (Rs.)2006 (Rs)2007(Rs)Equity Share Capital6,00,0008,00,000Land & Buildings3,70,0002,70,000ASSETS2006 Rs.(000)2007 Rs.(000)Reserves & Surplus3,30,0002,22,000Plant & Machinery4,00,0006,00,000Current Assets:Net Sales785900Debentures2,00l,0003,00,000Furniture20,00025,000Cash in hand & at Bank20,00080,00060,000300Cost of Goods Sold450500Long-term loans on Mortgage1,50,0002,00,000Other Fixed Assets25,00030,000Bills Receivables1,50,00090,000-60,000-40Operating Expenses:Bills payable50,00045,000Cash in hand & at Bank20,00080,000Sundry Debtors2,00,0002,50,000$50,00025General and Admn Expenses7072Sundry Creditors1,00,0001,20,000Bills Receivables1,50,00090,000Stock2,50,0003,50,0001,00,00040selling Expenses8090Other Current Liabilities5,00010,000Sundry Debtors2,00,0002,50,000Prepaid Expences2,0002,000Non-operating Expenses:Stock2,50,0003,50,000Total Current Assets6,20,0007,72,0001,52,00024.52Interest paid2530Prepaid Expences2,000Fixed Assets:Income-Tax708014,35,00016,97,00014,35,00016,97,000Land & Buildings3,70,0002,70,000- 1,00,000-27.03Plant & Machinery4,00,0006,00,0002,00,00050Furniture20,00025,0005,00025Other Fixed Assets25,00030,0005,00020Total Fixed Assets8,15,0009,25,0001,10,00013.49Total Assets14,35,00016,97,0002,62,00018.26LIABILITIES & CAPITALCurrent Liabilities:Bills payable50,00045,000-5,000-10Sundry Creditors1,00,0001,20,00020,00020Other Current Liabilities5,00010,0005,000100Total Current Liabilities1,55,0001,75,00020,00012.9Debentures2,00l,0003,00,0001,00,00050Long-term loans on Mortgage1,50,0002,00,00050,00033Total Liabilities5,05,0006,75,0001,70,00033.66Effect of Inventory Error on Two PeriodsEquity Share Capital6,00,0008,00,0002,00,00033Reserves & Surplus3,30,0002,22,000-1,08,000-32.73ParticularsIncorrect Ending InventoryCorrect Ending InventoryTotal14,35,00016,97,0002,62,00018.262006200720062007Net SalesRs 1,00,000Rs 1,00,000Rs 1,00,000Rs 1,00,000Cost of Goods Sold:Opening Inventory20,00025,00020,00015,000Purchases85,00065,00085,00065,000Comparative Income StatementCost of Goods available for sale1,05,00090,0001,05,00080,000for the year ending December 31, 2006 and 2007Less: Closing Inventory25,00010,00015,00010,000Cost of Goods Sold:80,00080,00090,00070,000Year ending 31 Dec.Increase/Decrease (Amount) RsIncrease/Decrease (%)Gross Profit (Sales - CGS)20,00020,00010,00030,0002006 (Rs)2007(Rs)Operating Expenses4,0005,0004,0005,000Net Sales78590011514.65Net Profit16,00015,0006,00025,000Less: Cost of Goods Sold4505005011.11Gross Profit3354006519.40Operating Expenses:General and Admn Expenses707222.86selling Expenses80901012.50Total Operating Expenses150162128.00Operating Profit1852385328.65Less: Non-operating Expenses:Interest paid2530520.00Net Profit before Tax1602084830.00Less: Income-Tax70801014.29Net Profit after-tax901283842.22
Sheet2HORIZONTAL ANALYSIS HINDUSTAN LEVER LIMITED: Comparative Profit and Loss Account For the year ended December 31PARTICULARS20022001Increase (Decrease)%SALES9954,85.301066,55.69(712,70.39)-6.68Other Income384,54.22381,79.052,75.170.72Total Revenue10339,39.5211049,34.74(709,95.22)-6.43Expenses8142,27.969105,97.52(963,69.56-10.58profit before Tax2197,11.561943,37.22253,74.3413.06Tax479,85.00402,42.0077,43.0019.24Profit after tax1717,26.561540,95.22176,31.3411.44Exceptional items38,41.90100,36.13(61,94.23)-61.72Net profit1755,68.461641,31.35114,37.116.97020022001Increase(decrease)%Shareholder's Funds and Liabilities220,12.44220,12.4400Share CapitalReserve and SurplusSecured LoansUnsecured LoansCurrent Liabilities and ProvisionsDeferred Tax LiabilitiesTotal Funds
Sheet3As on 31st DecemeberCommon-size Balance SheetLiabilities2006 (Rs.)2007 (Rs.)Assets2006 (Rs.)2007 (Rs.)as on march.31, 2011Equity Share Capital6,00,0008,00,000Land & Buildings370,000270,00020102011Reserves & Surplus3,30,0002,22,000Plant & Machinery400,000600,000Rs%Rs%Debentures2,00l,0003,00,000Furniture20,00025,000ASSETSLong-term loans on Mortgage1,50,0002,00,000Other Fixed Assets25,00030,000Current Assets:Bills payable50,000.0045,000Cash in hand & at Bank20,00080,000Cash in hand & at Bank$20,0001.39$80,0004.71Sundry Creditors1,00,0001,20,000Bills Receivables150,00090,000Bills Receivables$150,00010.45$90,0005.30Other Current Liabilities5,000.0010,000Sundry Debtors200,000250,000Sundry Debtors$200,00013.94$250,00014.73Stock250,000350,000Stock$250,00017.42$350,00020.62Prepaid Expences2,000Prepaid Expences-$2,0000.120.0Total Current Assets$620,00043.21$772,00045.49Fixed Assets:Land & Buildings$370,00025.78$270,00015.91Plant & Machinery$400,00027.87$600,00035.36Furniture$20,0001.39$25,0001.47Other Fixed Assets$25,0001.74$30,0001.77Total Fixed Assets$815,00056.79$925,00054.51Total Assets$1,435,000100.00$1,697,000100.00LIABILITIES & CAPITALCurrent Liabilities:Bills payable$50,0003.48$45,0002.65Sundry Creditors$100,0006.97$120,0007.07Other Current Liabilities$5,0000.35$10,0000.59Total Current Liabilities$155,00010.80$175,00010.31Debentures$200,00013.94$300,00017.681.393728223Long-term loans on Mortgage$150,00010.45$200,00011.79Total Liabilities$505,00035.19$675,00039.78Equity Share Capital$600,00041.81$800,00047.14Reserves & Surplus$330,00023.00$222,00013.08Total Liabilities$1,435,000100.00$1,697,000100.00
CapBudgWSEquity Analysis of a ProjectINPUT SHEET: USER ENTERS ALL BOLD NUMBERSINITIAL INVESTMENTCASHFLOW DETAILSDISCOUNT RATEInitial Investment=$50,000Revenues in year 1=$40,000Approach(1:Direct;2:CAPM)=2Opportunity cost (if any)=$7,484Var. Expenses as % of Rev=50%1. Discount rate =10%Lifetime of the investment10Fixed expenses in year 1=02a. Beta0.9Salvage Value at end of project=$10,000Tax rate on net income=40%b. Riskless rate=8.00%Deprec. method(1:St.line;2:DDB)=2If you do not have the breakdown of fixed and variablec. Market risk premium =5.50%Tax Credit (if any )=10%expenses, input the entire expense as a % of revenues.d. Debt Ratio =30.00%Other invest.(non-depreciable)=0e. Cost of Borrowing =9.00%Discount rate used=10.69%WORKING CAPITALInitial Investment in Work. Cap=$10,000Working Capital as % of Rev=25%Salvageable fraction at end=100%GROWTH RATES12345678910RevenuesDo not enter10.00%10.00%10.00%10.00%0.00%0.00%0.00%0.00%0.00%Fixed ExpensesDo not enter10.00%10.00%10.00%10.00%0.00%0.00%0.00%0.00%0.00%Default: The fixed expense growth rate is set equal to the growth rate in revenues by default.YEAR012345678910INITIAL INVESTMENTInvestment$50,000- Tax Credit$5,000Net Investment$45,000+ Working Cap$10,000+ Opp. Cost$7,484+ Other invest.$0Initial Investment$62,484SALVAGE VALUEEquipment$0$0$0$0$0$0$0$0$0$10,000Working Capital$0$0$0$0$0$0$0$0$0$14,641OPERATING CASHFLOWSLifetime Index1111111111Revenues$40,000$44,000$48,400$53,240$58,564$58,564$58,564$58,564$58,564$58,564-Var. Expenses$20,000$22,000$24,200$26,620$29,282$29,282$29,282$29,282$29,282$29,282- Fixed Expenses$0$0$0$0$0$0$0$0$0$0EBITDA$20,000$22,000$24,200$26,620$29,282$29,282$29,282$29,282$29,282$29,282- Depreciation$10,000$8,000$6,400$5,120$4,096$3,277$2,621$486$0$0EBIT$10,000$14,000$17,800$21,500$25,186$26,005$26,661$28,796$29,282$29,282-Tax$4,000$5,600$7,120$8,600$10,074$10,402$10,664$11,518$11,713$11,713EBIT(1-t)$6,000$8,400$10,680$12,900$15,112$15,603$15,996$17,278$17,569$17,569+ Depreciation$10,000$8,000$6,400$5,120$4,096$3,277$2,621$486$0$0- Work. Cap$0$1,000$1,100$1,210$1,331$0$0$0$0$0NATCF($62,484)$16,000$15,400$15,980$16,810$17,877$18,880$18,618$17,764$17,569$17,569Discount Factor11.106851.22511692251.35602066571.50091147381.66128386481.83879204572.03526697582.25273525222.49344001392.7598640793Discounted CF($62,484)$14,455$12,570$11,784$11,200$10,761$10,268$9,148$7,885$7,046$15,294Investment MeasuresNPV =$47,928IRR =23.55%ROC =60.12%BOOK VALUE & DEPRECIATIONBook Value (beginning)$50,000$40,000$32,000$25,600$20,480$16,384$13,107$10,486$10,000$10,000Depreciation$10,000$8,000$6,400$5,120$4,096$3,277$2,621$486$0$0BV(ending)$50,000$40,000$32,000$25,600$20,480$16,384$13,107$10,486$10,000$10,000$10,000
&C&"Times"&12CAPITAL BUDGETING WORKSHEET&R&P
Sheet1160000.46400160001244147565902.4YearSLMWDV MethodDepnProfit after DepnDepnProfit after Depn12,9517,0496,4003,600Comparative Balance Sheet of a Company22,9517,0493,8406,160for the year ending December 31, 2006 and 200732,9517,0492,3047,699Balance Sheet42,9517,0491,3828,618As on 31st DecemeberYear ending 31 Dec.Increase/Decrease (Amount) RsIncrease/Decrease (%)52,9517,0498309,170Liabilities2006 (Rs.)2007 (Rs.)Assets2006 (Rs.)2007 (Rs.)2006 (Rs)2007(Rs)Equity Share Capital6,00,0008,00,000Land & Buildings3,70,0002,70,000ASSETS2006 Rs.(000)2007 Rs.(000)Reserves & Surplus3,30,0002,22,000Plant & Machinery4,00,0006,00,000Current Assets:Net Sales785900Debentures2,00l,0003,00,000Furniture20,00025,000Cash in hand & at Bank20,00080,00060,000300Cost of Goods Sold450500Long-term loans on Mortgage1,50,0002,00,000Other Fixed Assets25,00030,000Bills Receivables1,50,00090,000-60,000-40Operating Expenses:Bills payable50,00045,000Cash in hand & at Bank20,00080,000Sundry Debtors2,00,0002,50,000$50,00025General and Admn Expenses7072Sundry Creditors1,00,0001,20,000Bills Receivables1,50,00090,000Stock2,50,0003,50,0001,00,00040selling Expenses8090Other Current Liabilities5,00010,000Sundry Debtors2,00,0002,50,000Prepaid Expences2,0002,000Non-operating Expenses:Stock2,50,0003,50,000Total Current Assets6,20,0007,72,0001,52,00024.52Interest paid2530Prepaid Expences2,000Fixed Assets:Income-Tax708014,35,00016,97,00014,35,00016,97,000Land & Buildings3,70,0002,70,000- 1,00,000-27.03Plant & Machinery4,00,0006,00,0002,00,00050Furniture20,00025,0005,00025Other Fixed Assets25,00030,0005,00020Total Fixed Assets8,15,0009,25,0001,10,00013.49Total Assets14,35,00016,97,0002,62,00018.26LIABILITIES & CAPITALCurrent Liabilities:Bills payable50,00045,000-5,000-10Sundry Creditors1,00,0001,20,00020,00020Other Current Liabilities5,00010,0005,000100Total Current Liabilities1,55,0001,75,00020,00012.9Debentures2,00l,0003,00,0001,00,00050Long-term loans on Mortgage1,50,0002,00,00050,00033Total Liabilities5,05,0006,75,0001,70,00033.66Effect of Inventory Error on Two PeriodsEquity Share Capital6,00,0008,00,0002,00,00033Reserves & Surplus3,30,0002,22,000-1,08,000-32.73ParticularsIncorrect Ending InventoryCorrect Ending InventoryTotal14,35,00016,97,0002,62,00018.262006200720062007Net SalesRs 1,00,000Rs 1,00,000Rs 1,00,000Rs 1,00,000Cost of Goods Sold:Opening Inventory20,00025,00020,00015,000Purchases85,00065,00085,00065,000Comparative Income StatementCost of Goods available for sale1,05,00090,0001,05,00080,000for the year ending December 31, 2006 and 2007Less: Closing Inventory25,00010,00015,00010,000Cost of Goods Sold:80,00080,00090,00070,000Year ending 31 Dec.Increase/Decrease (Amount) RsIncrease/Decrease (%)Gross Profit (Sales - CGS)20,00020,00010,00030,0002006 (Rs)2007(Rs)Operating Expenses4,0005,0004,0005,000Net Sales78590011514.65Net Profit16,00015,0006,00025,000Less: Cost of Goods Sold4505005011.11Gross Profit3354006519.40Operating Expenses:General and Admn Expenses707222.86selling Expenses80901012.50Total Operating Expenses150162128.00Operating Profit1852385328.65Less: Non-operating Expenses:Interest paid2530520.00Net Profit before Tax1602084830.00Less: Income-Tax70801014.29Net Profit after-tax901283842.22
Sheet2HORIZONTAL ANALYSIS HINDUSTAN LEVER LIMITED: Comparative Profit and Loss Account For the year ended December 31PARTICULARS20022001Increase (Decrease)%SALES9954,85.301066,55.69(712,70.39)-6.68Other Income384,54.22381,79.052,75.170.72Total Revenue10339,39.5211049,34.74(709,95.22)-6.43Expenses8142,27.969105,97.52(963,69.56-10.58profit before Tax2197,11.561943,37.22253,74.3413.06Tax479,85.00402,42.0077,43.0019.24Profit after tax1717,26.561540,95.22176,31.3411.44Exceptional items38,41.90100,36.13(61,94.23)-61.72Net profit1755,68.461641,31.35114,37.116.97020022001Increase(decrease)%Shareholder's Funds and Liabilities220,12.44220,12.4400Share CapitalReserve and SurplusSecured LoansUnsecured LoansCurrent Liabilities and ProvisionsDeferred Tax LiabilitiesTotal Funds
Sheet3Balance SheetAs on 31st DecemeberCommon-size Balance SheetLiabilities2006 (Rs.)2007 (Rs.)Assets2006 (Rs.)2007 (Rs.)as on Dec.31, 2007Equity Share Capital6,00,0008,00,000Land & Buildings370,000270,00020062007Reserves & Surplus3,30,0002,22,000Plant & Machinery400,000600,000Rs%Rs%Debentures2,00l,0003,00,000Furniture20,00025,000ASSETSLong-term loans on Mortgage1,50,0002,00,000Other Fixed Assets25,00030,000Current Assets:Bills payable50,000.0045,000Cash in hand & at Bank20,00080,000Cash in hand & at Bank$20,0001.39$80,0004.71Sundry Creditors1,00,0001,20,000Bills Receivables150,00090,000Bills Receivables$150,00010.45$90,0005.30Other Current Liabilities5,000.0010,000Sundry Debtors200,000250,000Sundry Debtors$200,00013.94$250,00014.73Stock250,000350,000Stock$250,00017.42$350,00020.62Prepaid Expences2,000Prepaid Expences-$2,0000.120.0Total Current Assets$620,00043.21$772,00045.49Fixed Assets:Land & Buildings$370,00025.78$270,00015.91Plant & Machinery$400,00027.87$600,00035.36Furniture$20,00040.00$25,0001.47Other Fixed Assets$25,0001.74$30,0001.77Total Fixed Assets$815,00056.79$925,00054.51Total Assets$1,435,000100.00$1,697,000100.00LIABILITIES & CAPITALCurrent Liabilities:Bills payable$50,0003.48$45,0002.65Sundry Creditors$100,0006.97$120,0007.07Other Current Liabilities$5,0000.35$10,0000.59Total Current Liabilities$155,00010.80$175,00010.31Debentures$200,00013.94$300,00017.681.393728223Long-term loans on Mortgage$150,00010.45$200,00011.79Total Liabilities$505,00035.19$675,00039.78Equity Share Capital$600,00041.81$800,00047.14Reserves & Surplus$330,00023.00$222,00013.08Total Liabilities$1,435,000100.00$1,697,000100.00Common-size Income Statementfor the years ending march. 2010 and 20112010 (Rs)2011(Rs)Rs.(000)%Rs.(000)%Net Sales785100.00900100.00Less: Cost of Goods Sold45057.3250055.56Gross Profit33542.6840044.44Operating Expenses:General and Admn Expenses708.92728.00selling Expenses8010.199010.00Total Operating Expenses15019.1116218.00Operating Profit18523.5723826.44Less: Non-operating Expenses:Interest paid253.18303.33Net Profit before Tax16020.3820823.11Less: Income-Tax708.92808.89Net Profit after-tax9011.4612814.2211.464968152914.2222222222
CapBudgWSEquity Analysis of a ProjectINPUT SHEET: USER ENTERS ALL BOLD NUMBERSINITIAL INVESTMENTCASHFLOW DETAILSDISCOUNT RATEInitial Investment=$50,000Revenues in year 1=$40,000Approach(1:Direct;2:CAPM)=2Opportunity cost (if any)=$7,484Var. Expenses as % of Rev=50%1. Discount rate =10%Lifetime of the investment10Fixed expenses in year 1=02a. Beta0.9Salvage Value at end of project=$10,000Tax rate on net income=40%b. Riskless rate=8.00%Deprec. method(1:St.line;2:DDB)=2If you do not have the breakdown of fixed and variablec. Market risk premium =5.50%Tax Credit (if any )=10%expenses, input the entire expense as a % of revenues.d. Debt Ratio =30.00%Other invest.(non-depreciable)=0e. Cost of Borrowing =9.00%Discount rate used=10.69%WORKING CAPITALInitial Investment in Work. Cap=$10,000Working Capital as % of Rev=25%Salvageable fraction at end=100%GROWTH RATES12345678910RevenuesDo not enter10.00%10.00%10.00%10.00%0.00%0.00%0.00%0.00%0.00%Fixed ExpensesDo not enter10.00%10.00%10.00%10.00%0.00%0.00%0.00%0.00%0.00%Default: The fixed expense growth rate is set equal to the growth rate in revenues by default.YEAR012345678910INITIAL INVESTMENTInvestment$50,000- Tax Credit$5,000Net Investment$45,000+ Working Cap$10,000+ Opp. Cost$7,484+ Other invest.$0Initial Investment$62,484SALVAGE VALUEEquipment$0$0$0$0$0$0$0$0$0$10,000Working Capital$0$0$0$0$0$0$0$0$0$14,641OPERATING CASHFLOWSLifetime Index1111111111Revenues$40,000$44,000$48,400$53,240$58,564$58,564$58,564$58,564$58,564$58,564-Var. Expenses$20,000$22,000$24,200$26,620$29,282$29,282$29,282$29,282$29,282$29,282- Fixed Expenses$0$0$0$0$0$0$0$0$0$0EBITDA$20,000$22,000$24,200$26,620$29,282$29,282$29,282$29,282$29,282$29,282- Depreciation$10,000$8,000$6,400$5,120$4,096$3,277$2,621$486$0$0EBIT$10,000$14,000$17,800$21,500$25,186$26,005$26,661$28,796$29,282$29,282-Tax$4,000$5,600$7,120$8,600$10,074$10,402$10,664$11,518$11,713$11,713EBIT(1-t)$6,000$8,400$10,680$12,900$15,112$15,603$15,996$17,278$17,569$17,569+ Depreciation$10,000$8,000$6,400$5,120$4,096$3,277$2,621$486$0$0- Work. Cap$0$1,000$1,100$1,210$1,331$0$0$0$0$0NATCF($62,484)$16,000$15,400$15,980$16,810$17,877$18,880$18,618$17,764$17,569$17,569Discount Factor11.106851.22511692251.35602066571.50091147381.66128386481.83879204572.03526697582.25273525222.49344001392.7598640793Discounted CF($62,484)$14,455$12,570$11,784$11,200$10,761$10,268$9,148$7,885$7,046$15,294Investment MeasuresNPV =$47,928IRR =23.55%ROC =60.12%BOOK VALUE & DEPRECIATIONBook Value (beginning)$50,000$40,000$32,000$25,600$20,480$16,384$13,107$10,486$10,000$10,000Depreciation$10,000$8,000$6,400$5,120$4,096$3,277$2,621$486$0$0BV(ending)$50,000$40,000$32,000$25,600$20,480$16,384$13,107$10,486$10,000$10,000$10,000
&C&"Times"&12CAPITAL BUDGETING WORKSHEET&R&P
Sheet1160000.46400160001244147565902.4YearSLMWDV MethodDepnProfit after DepnDepnProfit after Depn12,9517,0496,4003,600Comparative Balance Sheet of a Company22,9517,0493,8406,160for the year ending December 31, 2006 and 200732,9517,0492,3047,699Balance Sheet42,9517,0491,3828,618As on 31st DecemeberYear ending 31 Dec.Increase/Decrease (Amount) RsIncrease/Decrease (%)52,9517,0498309,170Liabilities2006 (Rs.)2007 (Rs.)Assets2006 (Rs.)2007 (Rs.)2006 (Rs)2007(Rs)Equity Share Capital6,00,0008,00,000Land & Buildings3,70,0002,70,000ASSETS2006 Rs.(000)2007 Rs.(000)Reserves & Surplus3,30,0002,22,000Plant & Machinery4,00,0006,00,000Current Assets:Net Sales785900Debentures2,00l,0003,00,000Furniture20,00025,000Cash in hand & at Bank20,00080,00060,000300Cost of Goods Sold450500Long-term loans on Mortgage1,50,0002,00,000Other Fixed Assets25,00030,000Bills Receivables1,50,00090,000-60,000-40Operating Expenses:Bills payable50,00045,000Cash in hand & at Bank20,00080,000Sundry Debtors2,00,0002,50,000$50,00025General and Admn Expenses7072Sundry Creditors1,00,0001,20,000Bills Receivables1,50,00090,000Stock2,50,0003,50,0001,00,00040selling Expenses8090Other Current Liabilities5,00010,000Sundry Debtors2,00,0002,50,000Prepaid Expences2,0002,000Non-operating Expenses:Stock2,50,0003,50,000Total Current Assets6,20,0007,72,0001,52,00024.52Interest paid2530Prepaid Expences2,000Fixed Assets:Income-Tax708014,35,00016,97,00014,35,00016,97,000Land & Buildings3,70,0002,70,000- 1,00,000-27.03Plant & Machinery4,00,0006,00,0002,00,00050Furniture20,00025,0005,00025Other Fixed Assets25,00030,0005,00020Total Fixed Assets8,15,0009,25,0001,10,00013.49Total Assets14,35,00016,97,0002,62,00018.26LIABILITIES & CAPITALCurrent Liabilities:Bills payable50,00045,000-5,000-10Sundry Creditors1,00,0001,20,00020,00020Other Current Liabilities5,00010,0005,000100Total Current Liabilities1,55,0001,75,00020,00012.9Debentures2,00l,0003,00,0001,00,00050Long-term loans on Mortgage1,50,0002,00,00050,00033Total Liabilities5,05,0006,75,0001,70,00033.66Effect of Inventory Error on Two PeriodsEquity Share Capital6,00,0008,00,0002,00,00033Reserves & Surplus3,30,0002,22,000-1,08,000-32.73ParticularsIncorrect Ending InventoryCorrect Ending InventoryTotal14,35,00016,97,0002,62,00018.262006200720062007Net SalesRs 1,00,000Rs 1,00,000Rs 1,00,000Rs 1,00,000Cost of Goods Sold:Opening Inventory20,00025,00020,00015,000Purchases85,00065,00085,00065,000Comparative Income StatementCost of Goods available for sale1,05,00090,0001,05,00080,000for the year ending December 31, 2006 and 2007Less: Closing Inventory25,00010,00015,00010,000Cost of Goods Sold:80,00080,00090,00070,000Year ending 31 Dec.Increase/Decrease (Amount) RsIncrease/Decrease (%)Gross Profit (Sales - CGS)20,00020,00010,00030,0002006 (Rs)2007(Rs)Operating Expenses4,0005,0004,0005,000Net Sales78590011514.65Net Profit16,00015,0006,00025,000Less: Cost of Goods Sold4505005011.11Gross Profit3354006519.40Operating Expenses:General and Admn Expenses707222.86selling Expenses80901012.50Total Operating Expenses150162128.00Operating Profit1852385328.65Less: Non-operating Expenses:Interest paid2530520.00Net Profit before Tax1602084830.00Less: Income-Tax70801014.29Net Profit after-tax901283842.22
Sheet2HORIZONTAL ANALYSIS HINDUSTAN LEVER LIMITED: Comparative Profit and Loss Account For the year ended December 31PARTICULARS20022001Increase (Decrease)%(Rs. In Lakhs)YearSalesStockProfit before TaxSALES9954,85.301066,55.69(712,70.39)-6.6820071,881709321Other Income384,54.22381,79.052,75.170.7220082,340781435Total Revenue10339,39.5211049,34.74(709,95.22)-6.4320092,655816458Expenses8142,27.969105,97.52(963,69.56-10.5820103,021944527profit before Tax2197,11.561943,37.22253,74.3413.0620113,7681,154672Tax479,85.00402,42.0077,43.0019.24Profit after tax1717,26.561540,95.22176,31.3411.44Exceptional items38,41.90100,36.13(61,94.23)-61.72Trend PercentagesNet profit1755,68.461641,31.35114,37.116.97(Base Year - 2003 = 100)YearSalesStockProfit before Tax(Rs. Lakhs)Trend %(Rs. Lakhs)Trend %(Rs. Lakhs)Trend %20031,881100.00709100.00321100.00020042,340124.40781110.16435135.5120052,655141.15816115.09458142.6820063,021160.61944133.15527164.1720073,768200.321,154162.76672209.3520022001Increase(decrease)%Shareholder's Funds and Liabilities220,12.44220,12.4400Share CapitalReserve and SurplusSecured LoansUnsecured LoansCurrent Liabilities and ProvisionsDeferred Tax LiabilitiesTotal Funds
Sheet3Balance SheetAs on 31st DecemeberCommon-size Balance SheetLiabilities2006 (Rs.)2007 (Rs.)Assets2006 (Rs.)2007 (Rs.)as on Dec.31, 2007Equity Share Capital6,00,0008,00,000Land & Buildings370,000270,00020062007Reserves & Surplus3,30,0002,22,000Plant & Machinery400,000600,000Rs%Rs%Debentures2,00l,0003,00,000Furniture20,00025,000ASSETSLong-term loans on Mortgage1,50,0002,00,000Other Fixed Assets25,00030,000Current Assets:Bills payable50,000.0045,000Cash in hand & at Bank20,00080,000Cash in hand & at Bank$20,0001.39$80,0004.71Sundry Creditors1,00,0001,20,000Bills Receivables150,00090,000Bills Receivables$150,00010.45$90,0005.30Other Current Liabilities5,000.0010,000Sundry Debtors200,000250,000Sundry Debtors$200,00013.94$250,00014.73Stock250,000350,000Stock$250,00017.42$350,00020.62Prepaid Expences2,000Prepaid Expences-$2,0000.120.0Total Current Assets$620,00043.21$772,00045.49Fixed Assets:Land & Buildings$370,00025.78$270,00015.91Plant & Machinery$400,00027.87$600,00035.36Furniture$20,00040.00$25,0001.47Other Fixed Assets$25,0001.74$30,0001.77Total Fixed Assets$815,00056.79$925,00054.51Total Assets$1,435,000100.00$1,697,000100.00LIABILITIES & CAPITALCurrent Liabilities:Bills payable$50,0003.48$45,0002.65Sundry Creditors$100,0006.97$120,0007.07Other Current Liabilities$5,0000.35$10,0000.59Total Current Liabilities$155,00010.80$175,00010.31Debentures$200,00013.94$300,00017.681.393728223Long-term loans on Mortgage$150,00010.45$200,00011.79Total Liabilities$505,00035.19$675,00039.78Equity Share Capital$600,00041.81$800,00047.14Reserves & Surplus$330,00023.00$222,00013.08Total Liabilities$1,435,000100.00$1,697,000100.00Common-size Income Statementfor the years ending Dec. 2006 and 20072006 (Rs)2007(Rs)Rs.(000)%Rs.(000)%Net Sales785100.00900100.00Less: Cost of Goods Sold45057.3250055.56Gross Profit33542.6840044.44Operating Expenses:General and Admn Expenses708.92728.00selling Expenses8010.199010.00Total Operating Expenses15019.1116218.00Operating Profit18523.5723826.44Less: Non-operating Expenses:Interest paid253.18303.33Net Profit before Tax16020.3820823.11Less: Income-Tax708.92808.89Net Profit after-tax9011.4612814.2211.464968152914.2222222222
CapBudgWSEquity Analysis of a ProjectINPUT SHEET: USER ENTERS ALL BOLD NUMBERSINITIAL INVESTMENTCASHFLOW DETAILSDISCOUNT RATEInitial Investment=$50,000Revenues in year 1=$40,000Approach(1:Direct;2:CAPM)=2Opportunity cost (if any)=$7,484Var. Expenses as % of Rev=50%1. Discount rate =10%Lifetime of the investment10Fixed expenses in year 1=02a. Beta0.9Salvage Value at end of project=$10,000Tax rate on net income=40%b. Riskless rate=8.00%Deprec. method(1:St.line;2:DDB)=2If you do not have the breakdown of fixed and variablec. Market risk premium =5.50%Tax Credit (if any )=10%expenses, input the entire expense as a % of revenues.d. Debt Ratio =30.00%Other invest.(non-depreciable)=0e. Cost of Borrowing =9.00%Discount rate used=10.69%WORKING CAPITALInitial Investment in Work. Cap=$10,000Working Capital as % of Rev=25%Salvageable fraction at end=100%GROWTH RATES12345678910RevenuesDo not enter10.00%10.00%10.00%10.00%0.00%0.00%0.00%0.00%0.00%Fixed ExpensesDo not enter10.00%10.00%10.00%10.00%0.00%0.00%0.00%0.00%0.00%Default: The fixed expense growth rate is set equal to the growth rate in revenues by default.YEAR012345678910INITIAL INVESTMENTInvestment$50,000- Tax Credit$5,000Net Investment$45,000+ Working Cap$10,000+ Opp. Cost$7,484+ Other invest.$0Initial Investment$62,484SALVAGE VALUEEquipment$0$0$0$0$0$0$0$0$0$10,000Working Capital$0$0$0$0$0$0$0$0$0$14,641OPERATING CASHFLOWSLifetime Index1111111111Revenues$40,000$44,000$48,400$53,240$58,564$58,564$58,564$58,564$58,564$58,564-Var. Expenses$20,000$22,000$24,200$26,620$29,282$29,282$29,282$29,282$29,282$29,282- Fixed Expenses$0$0$0$0$0$0$0$0$0$0EBITDA$20,000$22,000$24,200$26,620$29,282$29,282$29,282$29,282$29,282$29,282- Depreciation$10,000$8,000$6,400$5,120$4,096$3,277$2,621$486$0$0EBIT$10,000$14,000$17,800$21,500$25,186$26,005$26,661$28,796$29,282$29,282-Tax$4,000$5,600$7,120$8,600$10,074$10,402$10,664$11,518$11,713$11,713EBIT(1-t)$6,000$8,400$10,680$12,900$15,112$15,603$15,996$17,278$17,569$17,569+ Depreciation$10,000$8,000$6,400$5,120$4,096$3,277$2,621$486$0$0- Work. Cap$0$1,000$1,100$1,210$1,331$0$0$0$0$0NATCF($62,484)$16,000$15,400$15,980$16,810$17,877$18,880$18,618$17,764$17,569$17,569Discount Factor11.106851.22511692251.35602066571.50091147381.66128386481.83879204572.03526697582.25273525222.49344001392.7598640793Discounted CF($62,484)$14,455$12,570$11,784$11,200$10,761$10,268$9,148$7,885$7,046$15,294Investment MeasuresNPV =$47,928IRR =23.55%ROC =60.12%BOOK VALUE & DEPRECIATIONBook Value (beginning)$50,000$40,000$32,000$25,600$20,480$16,384$13,107$10,486$10,000$10,000Depreciation$10,000$8,000$6,400$5,120$4,096$3,277$2,621$486$0$0BV(ending)$50,000$40,000$32,000$25,600$20,480$16,384$13,107$10,486$10,000$10,000$10,000
&C&"Times"&12CAPITAL BUDGETING WORKSHEET&R&P
Sheet1160000.46400160001244147565902.4YearSLMWDV MethodDepnProfit after DepnDepnProfit after Depn12,9517,0496,4003,600Comparative Balance Sheet of a Company22,9517,0493,8406,160for the year ending December 31, 2006 and 200732,9517,0492,3047,699Balance Sheet42,9517,0491,3828,618As on 31st DecemeberYear ending 31 Dec.Increase/Decrease (Amount) RsIncrease/Decrease (%)52,9517,0498309,170Liabilities2006 (Rs.)2007 (Rs.)Assets2006 (Rs.)2007 (Rs.)2006 (Rs)2007(Rs)Equity Share Capital6,00,0008,00,000Land & Buildings3,70,0002,70,000ASSETS2006 Rs.(000)2007 Rs.(000)Reserves & Surplus3,30,0002,22,000Plant & Machinery4,00,0006,00,000Current Assets:Net Sales785900Debentures2,00l,0003,00,000Furniture20,00025,000Cash in hand & at Bank20,00080,00060,000300Cost of Goods Sold450500Long-term loans on Mortgage1,50,0002,00,000Other Fixed Assets25,00030,000Bills Receivables1,50,00090,000-60,000-40Operating Expenses:Bills payable50,00045,000Cash in hand & at Bank20,00080,000Sundry Debtors2,00,0002,50,000$50,00025General and Admn Expenses7072Sundry Creditors1,00,0001,20,000Bills Receivables1,50,00090,000Stock2,50,0003,50,0001,00,00040selling Expenses8090Other Current Liabilities5,00010,000Sundry Debtors2,00,0002,50,000Prepaid Expences2,0002,000Non-operating Expenses:Stock2,50,0003,50,000Total Current Assets6,20,0007,72,0001,52,00024.52Interest paid2530Prepaid Expences2,000Fixed Assets:Income-Tax708014,35,00016,97,00014,35,00016,97,000Land & Buildings3,70,0002,70,000- 1,00,000-27.03Plant & Machinery4,00,0006,00,0002,00,00050Furniture20,00025,0005,00025Other Fixed Assets25,00030,0005,00020Total Fixed Assets8,15,0009,25,0001,10,00013.49Total Assets14,35,00016,97,0002,62,00018.26LIABILITIES & CAPITALCurrent Liabilities:Bills payable50,00045,000-5,000-10Sundry Creditors1,00,0001,20,00020,00020Other Current Liabilities5,00010,0005,000100Total Current Liabilities1,55,0001,75,00020,00012.9Debentures2,00l,0003,00,0001,00,00050Long-term loans on Mortgage1,50,0002,00,00050,00033Total Liabilities5,05,0006,75,0001,70,00033.66Effect of Inventory Error on Two PeriodsEquity Share Capital6,00,0008,00,0002,00,00033Reserves & Surplus3,30,0002,22,000-1,08,000-32.73ParticularsIncorrect Ending InventoryCorrect Ending InventoryTotal14,35,00016,97,0002,62,00018.262006200720062007Net SalesRs 1,00,000Rs 1,00,000Rs 1,00,000Rs 1,00,000Cost of Goods Sold:Opening Inventory20,00025,00020,00015,000Purchases85,00065,00085,00065,000Comparative Income StatementCost of Goods available for sale1,05,00090,0001,05,00080,000for the year ending December 31, 2006 and 2007Less: Closing Inventory25,00010,00015,00010,000Cost of Goods Sold:80,00080,00090,00070,000Year ending 31 Dec.Increase/Decrease (Amount) RsIncrease/Decrease (%)Gross Profit (Sales - CGS)20,00020,00010,00030,0002006 (Rs)2007(Rs)Operating Expenses4,0005,0004,0005,000Net Sales78590011514.65Net Profit16,00015,0006,00025,000Less: Cost of Goods Sold4505005011.11Gross Profit3354006519.40Operating Expenses:General and Admn Expenses707222.86selling Expenses80901012.50Total Operating Expenses150162128.00Operating Profit1852385328.65Less: Non-operating Expenses:Interest paid2530520.00Net Profit before Tax1602084830.00Less: Income-Tax70801014.29Net Profit after-tax901283842.22
Sheet2HORIZONTAL ANALYSIS HINDUSTAN LEVER LIMITED: Comparative Profit and Loss Account For the year ended December 31PARTICULARS20022001Increase (Decrease)%(Rs. In Lakhs)YearSalesStockProfit before TaxSALES9954,85.301066,55.69(712,70.39)-6.6820031,881709321Other Income384,54.22381,79.052,75.170.7220042,340781435Total Revenue10339,39.5211049,34.74(709,95.22)-6.4320052,655816458Expenses8142,27.969105,97.52(963,69.56-10.5820063,021944527profit before Tax2197,11.561943,37.22253,74.3413.0620073,7681,154672Tax479,85.00402,42.0077,43.0019.24Profit after tax1717,26.561540,95.22176,31.3411.44Exceptional items38,41.90100,36.13(61,94.23)-61.72Trend PercentagesNet profit1755,68.461641,31.35114,37.116.97(Base Year - 2007= 100)YearSalesStockProfit before Tax(Rs. Lakhs)Trend %(Rs. Lakhs)Trend %(Rs. Lakhs)Trend %20071,881100.00709100.00321100.00020082,340124.40781110.16435135.5120092,655141.15816115.09458142.6820103,021160.61944133.15527164.1720113,768200.321,154162.76672209.3520022001Increase(decrease)%Shareholder's Funds and Liabilities220,12.44220,12.4400Share CapitalReserve and SurplusSecured LoansUnsecured LoansCurrent Liabilities and ProvisionsDeferred Tax LiabilitiesTotal Funds
Sheet3Balance SheetAs on 31st DecemeberCommon-size Balance SheetLiabilities2006 (Rs.)2007 (Rs.)Assets2006 (Rs.)2007 (Rs.)as on Dec.31, 2007Equity Share Capital6,00,0008,00,000Land & Buildings370,000270,00020062007Reserves & Surplus3,30,0002,22,000Plant & Machinery400,000600,000Rs%Rs%Debentures2,00l,0003,00,000Furniture20,00025,000ASSETSLong-term loans on Mortgage1,50,0002,00,000Other Fixed Assets25,00030,000Current Assets:Bills payable50,000.0045,000Cash in hand & at Bank20,00080,000Cash in hand & at Bank$20,0001.39$80,0004.71Sundry Creditors1,00,0001,20,000Bills Receivables150,00090,000Bills Receivables$150,00010.45$90,0005.30Other Current Liabilities5,000.0010,000Sundry Debtors200,000250,000Sundry Debtors$200,00013.94$250,00014.73Stock250,000350,000Stock$250,00017.42$350,00020.62Prepaid Expences2,000Prepaid Expences-$2,0000.120.0Total Current Assets$620,00043.21$772,00045.49Fixed Assets:Land & Buildings$370,00025.78$270,00015.91Plant & Machinery$400,00027.87$600,00035.36Furniture$20,00040.00$25,0001.47Other Fixed Assets$25,0001.74$30,0001.77Total Fixed Assets$815,00056.79$925,00054.51Total Assets$1,435,000100.00$1,697,000100.00LIABILITIES & CAPITALCurrent Liabilities:Bills payable$50,0003.48$45,0002.65Sundry Creditors$100,0006.97$120,0007.07Other Current Liabilities$5,0000.35$10,0000.59Total Current Liabilities$155,00010.80$175,00010.31Debentures$200,00013.94$300,00017.681.393728223Long-term loans on Mortgage$150,00010.45$200,00011.79Total Liabilities$505,00035.19$675,00039.78Equity Share Capital$600,00041.81$800,00047.14Reserves & Surplus$330,00023.00$222,00013.08Total Liabilities$1,435,000100.00$1,697,000100.00Common-size Income Statementfor the years ending Dec. 2006 and 20072006 (Rs)2007(Rs)Rs.(000)%Rs.(000)%Net Sales785100.00900100.00Less: Cost of Goods Sold45057.3250055.56Gross Profit33542.6840044.44Operating Expenses:General and Admn Expenses708.92728.00selling Expenses8010.199010.00Total Operating Expenses15019.1116218.00Operating Profit18523.5723826.44Less: Non-operating Expenses:Interest paid253.18303.33Net Profit before Tax16020.3820823.11Less: Income-Tax708.92808.89Net Profit after-tax9011.4612814.2211.464968152914.2222222222
Equity EarningsEPS = No. of Equity Shareholders Dividend DeclaredDPS = No. of Equity Shareholders DPSPayout Ratio = ----------- EPS
