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Section A (20 Marks)
Write short notes on any four of the following:
1. Evaluation of profitability
2. Trend Analysis
3. Earnings per Share (EPS)
4. Regulatory assets and liabilities
5. First in First Out (FIFO) method
Section B (30 marks)
(Attempt any three)
1. What is working capital? Discuss the factors affecting working capital.
2. The stock of material Z as on June 1984 is 500 units at Rs 2 per unit Following purchases and issues of this item were made subsequently:
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Date
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Receipts Qty.Units
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Rate per unit Rs.
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Issue Qty Units
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Jan6
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200
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Jan10
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400
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2.20
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Jan15
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300
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2.40.
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Jan20
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500
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Jan21
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200
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Jan 24
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500
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2.60
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Jan 25
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300
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Jan 28
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200
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Prepare a store ledger account showing how the value of the above issues should be arrived under the base stock method when it operates in conjunction with LIFO. Base stock is 200 units.
3. XYZ Co. Ltd. is a pipe manufacturing company. Its production cycle indicates that materials are introduced in the beginning of the production cycle; wages and overhead accrue evenly throughout the period of this cycle. Wages are paid in the next month following the month of accrual, work in process includes full units of raw material used in the beginning of the production process and 50% of wages and overheads are supported to be conversion costs. Details of production process and the components of working capital are as follows:
Production of pipes per annum 12,00,000 units
Duration of the production cycle One month
Raw materials inventory held One-month consumption
Finished goods inventory held for Two months
Credit allowed by creditors One month
Credit given to debtors Two months
Cost price of raw materials Rs. 60 per unit
Direct wages Rs. 10 per unit
Overheads Rs. 20 per unit
Selling price of finished pipes Rs. 100 per unit
You are required to calculate the amount of working capital required for the company.
4. What are accounting ratios ? how they are different from current ration and Fixed Assets Ratio. Explain with illustration.
Section C (50 marks)
(Attempt all questions. Every question carries 10 marks)
Read the case “Alpha Chemical Industries” and answer the following questions:
Case study: Alpha Chemical Industries
Alpha Chemical Industries is an organisation into the manufacture and sale of medicines which is a highly competitive industry. The company must maintain an aggressive marketing posture to survive.
The company has recently appointed a new president to look into the affairs of the company. The management of the Alpha Chemicals is concerned about the future of the company and has decided to use ratio analysis to identity potential trouble areas so that the performance of the organisation could significantly increase in the coming years.
In addition to the balance sheet and the income statement for years, i.e. 2011 and 2012 the industry averages have also been given.
Industry Averages for Financial Ratios
Balance Sheet as on 30 June 2012
Profit and Loss account for the year ending 30 June, 2012
Questions:
1. Is Alpha Chemical Industries a strong firm in this industry?
2. Identify the strengths and weaknesses of the company based on ratio analysis.
3. Do the changes in the ratios from 2011 to 2012 give evidence that the firm is growing stronger or weaker? Mention the ratios.
4. What is the necessacity of maintening balance sheet and profit and loss account in the company? What these accounts signigy in Alpha Chemical Industries?
Give suggestions to the company to improve their performance in the coming years.
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