Habits and Traits of Owlet Moths

Habits and Traits of Owlet Moths The owlet moths (family Noctuidae) account for over 25% of all butterflies and moths. As you might expect in a family this large, theres a good deal of diversity within this group. Though there are exceptions, most noctuids share a common set of traits outlined here. The family name, Noctuidae, derives from the Latin noctua meaning little owl or night owl (which in turn derives from nox, meaning night). What Do Owlet Moths Look Like? As youve undoubtedly already deduced from the family name, owlet moths tend to be nocturnal. If youve ever tried black lighting for insects, you must have collected some noctuids, because most will readily come to lights. The owlet moths are robust, stout-bodied insects, usually with filiform antennae. The fore wings tend to be mottled in color, often cryptic, and slightly longer and more narrowed than the hind wings. In most, the hind wings will be brightly colored but kept hidden under the forewings when at rest. Some owlet moths have tufts on the dorsal surface of the thorax (in other words, theyre furry!). For those readers who enjoy confirming their IDs by studying wing venation details, you should note the following traits in the owlet moths you collect: The subcosta (Sc) arises near the base of the hind wing.The subcosta (Sc) fuses briefly with the radius near the discal cell in the hindwingThree medio-cubital veins extend to the distal edge of the hind wing As David L. Wagner notes in Caterpillars of Eastern North America, there are no unique identifying traits of caterpillars in this family. In general, noctuid larvae are dull in color, with smooth cuticles and five pairs of prolegs. Owlet moth caterpillars go by varied common names, including loopers, earworms, armyworms, and cutworms. Owlet moths sometimes go by other common names, such as underwing moths or cutworm moths. The family is divided into several subfamilies, although there is some disagreement about their classification, and some sources may consider these groups separate families entirely. I generally follow the classification system found in the latest edition of Borror and Delongs Introduction to the Study of Insects. How Are Owlet Moths Classified? Kingdom – AnimaliaPhylum – ArthropodaClass – InsectaOrder – LepidopteraFamily - Noctuidae What Do Owlet Moths Eat? Noctuid caterpillars vary greatly in their diets, depending on the species. Some feed on foliage, living or fallen, some on detritus or decaying organic matter, and still others feed on fungus or lichens. Some noctuids are leaf miners, and others stem borers. The family Noctuidae includes some significant pests of agricultural crops and turfgrass. Adult owlet moths usually feed on nectar or honeydew. Some are capable of piercing fruit, thanks to a sturdy, sharp proboscis. One very unusual noctuid moth (Calyptra eustrigata feeds on the blood of mammals. You only need to worry about these blood-sucking moths if you live in Sri Lanka or Malaysia, fortunately. The Owlet Moth Life Cycle Noctuid moths undergo a complete metamorphosis, just like any other butterflies or moths. Most owlet moth caterpillars pupate in the soil or leaf litter. Special Adaptations and Behaviors of Owlet Moths The nocturnal noctuids can detect and avoid hungry bats, thanks to a pair of tympanal organs located at the base of the metathorax. These auditory organs can detect frequencies from 3-100 kHz, enabling them to hear a pursuing bats sonar and take evasive action. Where Do Owlet Moths Live? Globally, the noctuids number well over 35,000 species, with the worldwide distribution you would expect within such a large group. In North America alone, there are approximately 3,000 known species of owlet moths. Sources Borror and DeLongs Introduction to the Study of Insects, 7th Edition, by Charles A. Triplehorn and Norman F. Johnson Caterpillars of Eastern North America, by David L. Wagner Kaufman Field Guide to Insects of North America, by Eric R. Eaton and Kenn Kaufman Family Noctuidae, North Dakota State University. Accessed January 14, 2013. Family Noctuidae, Butterflies and Moths of North America website. Accessed January 14, 2013. Family Noctuidae, by Dr. John Meyer, North Carolina State University. Accessed January 14, 2013.

CASE STUDY Example | Topics and Well Written Essays - 1250 words

Case Study Example The consultant’s main role is to analyze the factors that can impact the business activities of the company and recommend an appropriate strategy that will be aligned with the corporation’s primary objectives. The UK apparel and textile industry is undergoing drastic changes to provide favorable conditions to the players of the sector (â€Å"Textile Industry†, 2010). In UK, the textile industry is among the major contributors in its economic growth and it employs more than 340,000 people (Macbeth & Miln, 2012). It has been reported by Rogers (2012) that Gross Value Added (GVA) of UK textile sector is about 11.5 billion pounds and clothing manufacture, textile manufacture, dry-cleaning and footwear services are worth one billion pound within the sector (Begum, 2012). As the barriers for trade have been reduced along with decline in transportation cost, the manufacturing plants are shifted to lower cost areas such as China and India (â€Å"Textile and Apparel Compendium†, 2012). In the UK textile sector, there has been a sharp decline in the domestic manufacturing of goods as majority of the textile companies have moved to offshore destinations. Despite the relocation of these plants, the sales and design capacity of the sector has remained constant (Rogers, 2012). The foremost reasons for the surging demand of UK based textiles is that the apparel is manufactured with strong emphasis on high value products that allow the customers to get their goods designed in a customized way (Norris, 2012). As a result of the Industrial Revolution in the global textile industry, the Techtextil has become the latest norm in the textile sector. It encompasses a wide variety of taxonomy that is utilized by all the players operating within the industry (Goworek, 2010). In order to address the key challenge faced by the company, it has become imperative to analyze the alternatives that can be

EMBA 560 Executive position week 3 journal 3 Essay

EMBA 560 Executive position week 3 journal 3 - Essay Example When my hopes have been pinned on the outcome of an event that does not turn out as I had expected, I turn to self-denial and refuse to give up my original position. I hope against hope that things will eventually turn out how I expected them to, only for those hopes to be dashed by the throw of the dice. When my expectations go unfulfilled, it takes some time – in fact, a lot of time – for me to overcome my disbelief and extreme disappointment. Sometimes I take it as a personal affront that luck did not turn may way; there are just some changes that are too difficult to accept. I also give myself a thumbs down, though to a lesser degree, to behaviours 1 (separating strategy from tactics) and 3 (feeling threatened by obstacles rather than challenged). (2) I deserve a thumbs sideways in my ability to â€Å"see patterns and make logical connections or resolve contradictions and anticipate their consequences.† There are times when these happen and I am able to respond in an appropriate and timely manner, in which case I give myself a nice on the back and say job well done. There are also times when I completely miss the boat, and depending on my personal emotional investment in the occurrence, I either: act in the manner I described in attribute (1) above in the important matters and for which I gave myself a thumbs down; or merely shrug my shoulders and say, better luck next time, if the issue was not that important. I give myself thumbs sideways to all the other behaviours not classified as thumbs-up or thumbs-down for me. (3) I can give myself a resounding thumbs-up for being able to â€Å"prioritize seemingly conflicting goals†¦to zero in on the critical few and put aside the trivial many when allocating time and resources.† I pride myself in quickly identifying what is important and devoting for the moment my full attention and abilities on the quick resolution of the most important task at hand. I figure out it is best to get those

The Scarlet Letter by Nathaniel Hawthorne Research Paper - 1

The Scarlet Letter by Nathaniel Hawthorne - Research Paper Example Her lover Reverend Dimmesdale whom she had chosen to protect later confessed at the gallows where Hester was punished earlier and dies. Chillingworth, who was Hesters husband, also dies leaving Hester and pearl alone. After several years, Hester died and buried near Dimmesdales’s grave; they shared the gravestone with writings â€Å""On a field, sable. The letter A, gules" (Hawthorne). In Chapter one, the prison door is symbolic, it is introduced in this chapter, and it is used when a crowd of people was standing outside the prison. It is built with heavy oak and is studded with iron spikes. There is a rose bush that grows near the same prison door; this shows how nature is kind despite being criminal it is said to provide â€Å"sweet moral blossom† (Hawthorne). The character Hester Prynne is introduced in chapter two. Sin, social order, and knowledge are clearly shown. The writer uses the symbol to depict sin, and that sinner must be punished in public according to puritan customs and belief. Hester’s punishment was to be an example to other people who were planning to commit adultery. However, only the woman was punished, and the man left, the women did not seek to pity, Hester instead they condemned her as a sinner, an adulterer. They saw her as a great sinner, they never imagined they being sinners. Hester fights it by accepting the condemnation for the need for love after his husband going along with the possibility of being dead. The perfect embroidery of the â€Å"A† letter on her dress was a sign of acceptance the women saw it as Hester was proud of the sin she had committed. She accepted the reality rather than resisting since her child was the fruit of the act. Resisting it was like opposing her child, Pearl. Hester from the beginning was different from other women she was said to be beautiful, tall and radiates natural dignity, unlike other women. The third Chapter introduces Hester punishment as an act against humanity; the puritan order makes

Effects of Japans Ageing Population on Business

Effects of Japans Ageing Population on Business Introduction Many nations in the world have faced with many problems of their population growth. However, the dominant factor in the next society might expose these problems in more details, which most people might begin to pay attention deeper on these problems such as the rapid growth in the amount of older population and the rapid shrinking of the younger generation, with the threats of demographic development such as welfare effects, social conflicts and reducing workforce, etc. Therefore, the government in each nation should have more considerations on these problems before it is growing to be the unsolved problems. Recently, this phenomenon is spreading its effect to many nations in this globe. Specifically in Japan, there are many researches and figures which can be clearly shown that Japan are staying at the highest position of the middle ages average and also leading in the decline of population growth. This scale of the problem in Japan is unprecedented for the world. Therefore, Japan could be an example for many nations that are facing the same crisis which could learn how to handle or find out any solutions or policies to cope with this problem. In one effect, this change created many problems in Japan such as the declination of workforce, extra welfare burden and the lack of opportunities and chances for new generation. It is also includes the issue integration of young and old people in workplaces. Nevertheless, aging population has not had only drawbacks. On the other hand, it is the opportunities for many companies to invent any innovations which suit with middle aged and old age groups. This essay consists of three sections. The first section will focus on two topics which comprised by increasing life expectancy and declining population in Japan. The second section of the essay will examine on shrinking population of working age and Japans health care service industry. The final section of the essay will present the opportunities opened up for business by population aging such as how to develop products, design, innovation and services for silver market customer that suitable for the elderly target groups. Part I: Demographic changes and economic growth in Japan To comprehend the demographic component that caused population aging that would be refer to stable populations. According to the graph that presents age-specific fertility and the figure of mortality rates remain stable over time, from this conclusion in a number of contribute to population aging that remain constant and eventually becomes time instant as well. The report shows that in a global context, Japans ageing is remarkable for its pace. The country took only 24 years to transform from the elderly society, where the older population accounted for 7% from the total population to the elderly society, where it doubled of the share, according to UN definitions. Source: World population prospects, 2008 Revision, United Nations. ( http://www.gereports.com/healthymagination-studies-japans-aging-population/) The abstract foundation of a decreased form models applied in econometric studies are: (1) saving and investment in the life cycle model (2) age-specific modification in labour productivity. The reason why this theoretical is that important to focus on is peoples economic needs modulate at different the way of life and peoples behavior, the effect of economic performance that effects in a countrys age structure has been changed. By contrast, most of young people demand investment in education and health, adults contribute labour and savings, and the aged demand retirement income and health care. (Kohlbacher, Herstatt, 2008) Life expectancy Some people said that the experience of happiness could be changed in case of getting older. According to a research from 80 countries over the world shows a notably in a same pattern. Happiness is looks like a U-shaped curve, many people are happiest from the beginning until end of their lives. Most people reach at the bottom at age 44. At the lowest point of the graph, they will be stuck in this point until age 50 as long as their healthy, the level of their happiness will increase and the risk of depression will decline. This pattern is still the same even in rich or poor persons. (Moynagh and Worseley) Furthermore, those people who born between 1925 to 1945 will count in the ranks of the extreme older age. This group has faced difficult improvements in their life expectancy over the past 40 years than earlier generations. However, the propellant of longer life will increase in the elderly following by changes in lifestyle such as less smoking, advances in medicine such as the use of antibiotics, environmental improvement such as living in the place that have less pollution and healthier diets such as eat more fibre. Declining population in Japan Japan is one of the most recently a rapid growing of aging country but low birth rate. In 2005, over the next several decades, the figure of people who aged over 64 will increase rapidly whereas the possibility of actual population has been declined. In Germany and Japan that facing the fertility rates that are far under the replacement rate wanted to maintain a steady population. Nowadays the number of birth rate in Japan and German y are approximately 2.1 children per woman. Assuming of authentic projections, which is the figure of fertility rate might be slowly revert to the replacement proportion in Japan. By contrast this figure could be remaining nearly to the recent level (1.4) in Germany. In fact, Assuming of German forecasts are durable but still declining of the immigration, which is approximately 2 immigrants per 1,000 residents within an annual, compared with 5.6 earlier from this decade. In Japan, the immigration is assumed to be negligible compared with Germany. (http://www.brookings.edu/articles/1997/summer_saving_bosworth.aspx) Part II: Effect of population aging on the countrys economy According to the increasing number of Japans population aging that have many effects on their country such as decreasing of working age as the quantity of retirement has risen rapidly and one more reason that effect on this country is the quality of Japans health care service industry which is very important section for the elderly due to an increasing demand of the elderly therefore health care services will be necessary to prepare their equipments and services to deal with the rising number of older people from now on. Shrinking population of working age As Japan has explored, when a large amount of the population who is in a sector of retirement-planning years (34 percent are aged 40-64 versus 27 percent in the U.S.) the figure of saving rates can increase to levels that lower economic growth and consumption. In a situation known as Ricardian equivalence when budget deficits have fueled an increasing concern about Japans economic in the future, these caused ageing workforce due to respond to prepare their saving. Never the less, most of countries, the numbers of retirement are probably to have an opposite effect. One OECD analysis found that in the industrial, the figure of saving rates world might be decreased approximately eight percent of GDP during the late 2020s. Especially in Japan, where the number of retirees depends on their personal savings to finance in their old age and these has also caused all companies that have to train new employees due to the increasing of retirement of aging people so far. (http://www.globalaging.org/health/world/depopulationeuropejapan.htm) Japans health care service industry This is the most pledge industry of the health care service industry because of a constantly growing customer base and many factors that followed by requiring among the elder people in health care services. Normally, the consumption on health care services of elder people who aged 70 and above are around three times those compared with their age average. Even if this effect on the aid from the health insurance plans, it is evident that the possible demand of elder people for health care services should rise with rising number of the elderly. Furthermore, same as other quality services, the income flexibility of health care services is usually higher than to live together in unity. This means that most of elder people are willing to pay without considering for the quality further than quantity of the services. According to the statement, the health care service industry should produce only the good value services that most of people are willing to pay. On the other hand, the government with fewer considerations and fewer responses for the difference of the quality services legislated to fix the price for the health care services. This frequently according to ineffective resource allocations, incorporating the creation in black markets. Eventually, the condition of health care services is extremely arranged by two layers of arrangements. The first one is the arrangement on clinics and hospitals. The qualification of medical services staffs, nurses and doctors. Another condition is a process to apply to the health care services of the public health insurance. These conditions were primordially set for patients profits. However, sector fact are commonly used in subsist poor health care supplier for the protection. Consequently, they actually obviate in supply increased of capable health care services encounting with the potential require. If the conditions were removed, all of the health care services can be mushrooming substantially. Part III, Opportunities opened up for business by population aging Among of the problems that many nations have faced to including in Japan whereas there still have the opportunities for certain business to prevent many products, design, innovation and improve their services including the way to manage business to handle with changing consumer values and lifestyle of the elderly. Developing products, design, innovation and services for silver market customer According to the aging of industrialized, led by Japan, demand of the facilities of elderly people to help them manage everything in their life easier than common life. For this reasons, many companies in Japan are trying to find the methods, ideas and helpful facilities to create a new product for providing attractive and helpful solutions dealing with elderly people to very old consumers. This is a great chance for companies, commerce, manufacturers and service providers to develop their products for these aging groups. Until now, the figure of the elderly people are remain rising share in the total population, also a rise in life expectancy, products and services have been considered and researched so far for old age to support them lead their lives easier as an independent. These problems have become important hardly contain any attention for a long time in the past and the elderly users rejected the common friendly solution because these solutions clearly created from the technology of handicapped and rehabilitation. Thus, developing the new innovative products should be covered for all age in a concept design for all however, all products should be thoroughly considered on safety and comfort especially for elderly age. From the idea as above, the new research project Sentha has prevented. Sentha is stand for Everyday Technology for Senior Households and it also start establishing to develop new product concepts and new approaches. With the mission for the research, contributory observation for Sentha achieved quite fundamental importance. The advantage of Contributory observation has been sensitive including habitual, unreflective and everyday action. There is no accident that contributory observation which is regarded as the royal road area research due to the linguistic-interrogative methods such as interviews and group discussions which cannot be explored by a position to train ones sights on things. Contributory observation is thus, different from an interview, sensitive and usable equipment for researching everyday life. Hand movement and motions that can go on in a completely routine manner, especially it can be a point of departure for ones work. This can be a trick from spending life of an elderly people. For instance, a screwed-in light bulb as a darning mushroom which is illuminated from within for elderly age who cannot see well in dim light. These are some hi-tech products and services in Japan that they created for the elderly which is dominated by nursing care, pharmaceuticals and medical equipment. Intelligent toilets In many Japanese hotels, the healthiness of defecations can be showed by this machine, variety of heat functions are set at the seat to push up elderly people in order to help them getting off the toilet easier. Now, with a co-operation of two large companies Toto and Daiwa house installed toilets for pensioners which is a concept for this mergence. These toilets are installed medical sugars that can measure blood pressure, body fat and blood sugar rates of the user. Including a built-in internet device that can email any healthy information directly to the doctor to ensure their health. Cars Carmakers have created intelligent cars with dashboards that have large numbers and letters to let the driver especially the elderly people see the dashboards easily. Moreover, this car is including accelerator and hand controls for the brake, and swiveling seats to make it easier when the driver want to get in and out. Robot pets It quite difficult to the elderly who want to have a pet therefore this is a high technology to create a robot pet that seems like a real pet which can be responded the owners with opening and closing its eyes and it also moving its tail as well. Furthermore, The Institute of Physical and Chemical Research in Japan has developed the robots which is working as a nurse that can help and lift the elderly up and help them out of bed. (http://www.guardian.co.uk/money/2010/mar/20/japan-ageing-population-technology) Changing consumer values and lifestyle Japans recent dynamic social environment, merged with economic globalization the development of information technology, mostly influences the diversification of people with their values and lifestyles. To be more precise, people become more liberal toward different ways of thinking therefore not only the internet and communication technology that infiltrate on peoples lifestyle and values but also the way that their communication styles and personal relations as well. The important factors that affect in changing consumer values and lifestyles are the spread of epidemic. For instance, tainted food and avian flu and also disasters from other natural that cause greater concern for security and disease prevention. This enhanced concern encourages consumer for safe, healthy food also in other health-related goods. However, it would be difficult to analyze or specific factors to influence them to change their habits. These are mechanism of change in and diversification of values in Japan: awareness of health ,safety and prevention, will to learn, value seeking, generosity in differences, view of family and marriage (Kohlbacher, Herstatt, 2008) Marketing for the silver market The demand of the older customers is very necessary in a market of retailing trade due to the possible of the best-agers is quite underestimated. This is varied target group, including the elderly who age over 50 years with the difference of socio-demographic characteristics, leisure time activities, value orientations and consumer preferences. In fact, these can be considered that, negligence of the specific interests and consumption habits of the elderly, in common they share the basic needs to provide themselves by retail shopping as long as they are able to do these activities. The report in German, the amount of the spending power of aging people is also attractive. Aging people between 50-59 years old spent approximately 24000 euro in the retail trade whereas those aged over 60 had 20000 euro in each year to spend. However, the implication of the demographic on retail trade affects the decision on the location of commercial establishments. Demanding of the elderly groups regard ing comfort and convenience when they need shopping coincide with the target groups of younger people. Purchase outlets should be accessible includes the design of products that can make the consumer feel satisfied. (Kohlbacher, Herstatt, 2008) Conclusion

An Image of Truth :: Essays Papers

An Image of Truth Plato teaches that reality is to be found in universal â€Å"forms.† Images of objects are therefore pale imitations of reality: that is, at least twice removed from the truth. Nevertheless, Jane Austen in Pride and Prejudice suggests that the image of a person can offer true insights that the actual person might not. In her very first meeting with Mr. Darcy, Elizabeth is left â€Å"with no very cordial feelings towards him† and after spending â€Å"four days in the same house with him† she still â€Å"think[s] him very disagreeable† (9, 53).1 Even after Mr. Darcy has directly and blatantly declared his love for Elizabeth she cannot consider him favorably and exclaims â€Å"I have never desired your good opinion† (125). Just to walk with him in the park â€Å"seem[s] like willful ill‑nature or a voluntary penance† (120). However, Elizabeth’s feelings for Darcy change after she views the portrait of him at Pemberley. She d evelops a â€Å"more gentle sensation toward the original† after seeing the painting and may even consider Darcy’s â€Å"regard with a deeper sentiment of gratitude than it had ever raised before† (162). Elizabeth needs the indirect image of Darcy in this portrait to view the man himself more accurately than she can when she faces him in person. The painting offers her time to contemplate Darcy’s true character. Furthermore, the frozen image creates a distance from which Elizabeth may consider Darcy without the interference of her intense emotions. When Elizabeth is face to face with Darcy, she must engage him in conversation, but when she examines the portrait, she does not have to speak: she can look at the painting for â€Å"several moments†¦in earnest contemplation† and even â€Å"return to it again† before leaving (162). Socially, great importance is placed on witty dialogue and polite conversation. At the first ball, the newly arrived Mr. Darcy is criticized for his reserve; rather than extend himself to form new acquaintances, he speaks only â€Å"occasionally to [a lady] of his own party† (8). Yet by refraining from conventional conversation, Mr. Darcy is able to form sound opinions. When he â€Å"wish[es] to know more of [Elizabeth]† he first â€Å"attend[s] to her conversations with others† before directly engaging her in dialogue (17). He even advises Elizabeth to take her time in getting to know him, urging â€Å"I could wish, Miss Bennet, that you were not to sketch my character at the present moment†¦the performance would reflect no credit on either.

Additional Solved Sums, Financial Management, Prassanna Chandra

CHAPTER 2 1. As a rule of thumb, real rates of interest are calculated by subtracting the inflation rate from the nominal rate. What is the error from using this rule of thumb for calculating real rates of return in the following cases? Nominal rate (%)7121822 Inflation rate (%)4 6 810 Solution: [pic] 2. As a rule of thumb, real rates of interest are calculated by subtracting the inflation rate from the nominal rate. What is the error from using this rule of thumb for calculating real rates of return in the following cases? Nominal rate (%)481119 Inflation rate (%)13 2 4 Solution: [pic] CHAPTER 3 1. At the end of March, 20X6 the balances in the various accounts of Dhoni & Company are as follows: Rs. in million Accounts Balance Equity capital 120 Preference capital 30 Fixed assets (net) 217 Reserves and surplus 200 Cash and bank 35 Debentures (secured) 100 Marketable securities 18 Term loans (secured) 90 Receivables 200 Short-term bank borrowing (unsecured) 70 Inventories210 Trade creditors 60 Provisions 20 Pre-paid expenses 10 Required: Prepare the balance sheet of Dhoni & Company as per the format specified by the Companies Act. Solution: Balance Sheet of Dhoni & Company As on March 31, 20 X 6 Liabilities | |Assets | | |Share capital | |Fixed assets |   | |Equity |120 |Net fixed assets |217 | |Preference |30 | |   | |Reserve & surplus |200 |Investments |   | |   | |Marketable securities |18 | |Secured loans | |Current assets, loans & advances |   | |Debentures |100 | |   | |Term loans |90 | | | |   | |Pre-paid expenses |10 | |Unsecured loans | |Inventories |21 0 | |Short term ank borrowing |70 |Receivables |200 | |Current liabilities & provisions | |Cash & Bank |35 | |Trade creditors |60 | |   | |Provisions |20 | |   | |   |690 |   |690 | 2. At the end of March, 20X7 the balances in the various accounts of Sania Limited are as follows: Rs. in million Accounts Balance Equity capital 250 Preference capital 80 Fixed assets (net)380 Reserves and surplus350 Cash and bank100 Debentures (secured)190 Marketable securities 30 Term loans (secured)120 Receivables420 Short-term bank borrowing (unsecured) 110 Inventories310 Trade creditors 90 Provisions 70 Pre-paid expenses 20 Required: Prepare the balance sheet of Sania Limited as per the format specified by the Companies Act. Solution: Balance Sheet of Sania Limited as on March 31, 20 X 7 Liabilities | |Assets | | |   | | |   | |Share capital | |Fixed assets |   | |Equity |250 |Net fixed assets |380 | |Preference |80 | |   | |Reserve & surplus |350 |Investments |   | |   | |M arketable securities |30 | |Secured loans | |Current assets, loans & advances |   | |Debentures |190 | |   | |Term loans |120 | | | |   | |Pre-paid expenses |20 | |Unsecured loans | |Inventories |310 | |Short term bank borrowing |110 |Receivables |420 | |Current liabilities & provisions | |Cash & Bank |100 | |Trade creditors |90 | |   | |Provisions |70 | |   | |   |1260 |   |1260 | 3. The comparative balance sheets of Evergreen Company are given below: (Rs. in million) Owners' Equity and Liabilities As on 31. 3. 20X6 As on 31. 3. 20X7 Share capital 70 70 Reserves and surplus 40 80 Long-term debt 80 90 Short-term bank borrowings 80 85 Trade creditors 40 70 Provisions 10 20 Total320415 Assets Fixed assets (net)120210 Inventories 90 95 Debtors 60 65 Cash 25 30 Other assets 25 15 Total320415 The profit and loss account of Evergreen Company for the year ending 31st March 2007 is given below: (Rs. in million) Profit & Loss Account for the Period 1. 4. 20X6 to 31. 3. 20X7 Net sales750 Cost of goods sold 505 Stocks290 Wages and salaries105 Other manufacturing expenses110 245 Gross profit Operating expenses135 Selling, administration and general120 Depreciation 15 Operating profit110 Non-operating surplus or deficit(20) EBIT 90 Interest 25 Profit before tax 65 Tax 15 Profit after tax 50 Dividends 10 Retained earnings 40 Required: (a) Prepare the classified cash flow statement for the period 1. 4. 20X6 to 31. 3. 20X7 b) Develop the cash flow identity for the period 1. 4. 20X6 to 31. 3. 20X7 Solution: |A. Cash flow from operating activities | | |- |Net profit before tax and extraordinary items | |85 | | |- |Adjustments for | | | | | |Interest paid | |25 | | | |Depreciation | |15 | | |- |Operating profit before working capital changes |125 | | |- |Adjustments for | | | | | |Inventories | |(5) | | | |Debtors | |(5) | | | |Trade creditors | |30 | | | |Provisions | |10 | | | |Increase in other assets | |10 | | |- |Cash generated rom operations | |165 | | | |Income tax paid | |(15) | | |- |Cash flow before extraordinary items | |150 | | | |Extraordinary item | |(20) | | |- |Net cash flow from operating activities | |130 | |B. |Cash flow from investing activities | | | | |- |Purchase of fixed assets | |(105) | | |- |Net cash flow from investing activities | |(105) | | | | | | | |C. Cash flow from financing activities | | | | |- |Increase in loans | |15 | | |- |Dividends paid | |(10) | | |- Interest paid | |(25) | | |Net cash flow from financing activities | |(20) | | | | | | | |D. |Net increase in cash and cash equivalents | |5 | | |- |Cash and cash equivalents as on 31. 03. 0X6 |25 | | |- |Cash and cash equivalents as on 31. 03. 20Ãâ€"7 | |30 | NoteIt has been assumed that â€Å"other assets† represent â€Å"other current assets†. (b) A. Cash flow from assets -Operating cash flow90 -Net capital spending (105) -Decrease in net working capital35 -Cash flow from assets20 B. Cash flow to creditors -Interest paid25 -Repayment of long term debt (15) -Cash flow to creditors10 C. Cash flow to shareholders -Dividends paid10 -Net new equity raised 0 -Cash flow to shareholders10 We find that (A)=(B) + ( C) i. e. Cash flow from assets=Cash flow to creditors + Cash flow to shareholders 4. The comparative balance sheets of Xavier Limited are given below: (Rs. in million) Owners' Equity and Liabilities As on 31. 3. 20X6 As on 31. 3. 20X7 Share capital 20 30 Reserves and surplus 10 18 Long-term debt 30 25 Short-term bank borrowings 15 15 Trade creditors 10 15 Provisions 5 8 Total 90 111 Assets Fixed assets (net) 16 20 Inventories 44 55 Debtors 20 21 Cash 5 8 Other assets 5 7 Total 90 111 The profit and loss account of Xavier Limited for the year 2007 is given below: (Rs. in million) Profit & Loss Account for the Period 1. 4. 20X6 to 31. 3. 20X7 Net sales220 Cost of goods sold 140 Stocks 90 Wages and salaries 35 Other manufacturing expenses 15 80 Gross profit Operating expenses 40 Selling, administration and general 20 Depreciation 5 Operating profit 15 Non-operating surplus or deficit 1 EBIT 16 Interest 4 Profit before tax 12 Tax 2 Profit after tax 10 Dividends 2 Retained earnings 8 Required: (a) Prepare the classified cash flow statement for the period 1. 4. 20X6 to 31. 3. 20X7 b) Develop the cash flow identity for the period 1. 4. 20X6 to 31. 3. 20X7 Solution: |A. Cash flow from operating activities | | | | |- |Net profit before tax and extraordinary items | |11 | | |- |Adjustments for | | | | | |Interest paid | | 4 | | | |Depreciation | | 5 | | |- |Operating profit before working capital changes | 20 | | | | Adjustments for | | | | |- | | | | | | |Inventories | |(11) | | | |Debtors | | (1) | | | |Trade creditors | | 5 | | | |Provisions | | 3 | | | |Increase in other assets | | (2) | | |- |Cash generated from operations | | 14 | | | |Income tax paid | | (2) | | |- |Cash flow before extraordinary items | | 12 | | | |Extraordinary item | | 1 | | |- |Net cash flow from operating activities | | 13 | |B. |Cash flow from investing activities | | | | |- |Purchase of fixed assets | | (9) | | |- |Net cash flow from investing activities | | (9) | | | | | | | |C. Cash flow from financing activities | | 10 | | |- Increase in equity | | | | |- |Repayment of term loans | | (5) | | | |-Dividend paid | |(2) | | |- |Interest paid | | (4) | | |Net cash flow from financing activities | | (1) | | | | | | | |D. |Net increase in cash and cash equivalents | | 3 | | |- |Cash and cash equivalents as on 31. 03. 20X6 | 5 | | |- |Cash and cash equivalents as on 31. 03. 20Ãâ€"7 | | 8 | NoteIt has been assumed that â€Å"other assets† represent â€Å"other current assets†. (b) ACash flow from assets -Operating cash flow19 -Net capital spending(9) -Decrease in net working capital(9) Cash flow from assets 1 B. Cash flo w to creditors -Interest paid 4 -Repayment of long term debt 5 -Cash flow to creditors 9 C. Cash flow to shareholders -Dividends paid 2 -Net new equity raised(10) -Cash flow to shareholders (8) We find that (A)=(B) + ( C) i. e. , Cash flow from assets=Cash flow to creditors + Cash flow to shareholders CHAPTER 4 1. Premier Company's net profit margin is 8 percent, total assets turnover ratio is 2. 5 times, debt to total assets ratio is 0. 6. What is the return on equity for Premier? Solution: Net profit Return on equity = Equity = Net profit Net sales Total assets x x Net sales Total assets Equity 1 = 0. 08 x 2. 5 x = 0. 5 or 50 per cent 0. 4 Debt Equity Note : = 0. 6 So = 1- 0. 6 = 0. 4 Total assets Total assets Hence Total assets/Equity = 1/0. 4 2. The following information is given for Alpha Corporation Sales3500 Current ratio1. 5 Acid test ratio1. 2 Current liabilities1000 What is the inventory turnover ratio? Solution: Current assets = Current liabilities x 1. 5 = 1000 x 1. 5 = 1500 Quick assets= Current liabilities x 1. 2 = 1000 x 1. 2 = 1200 Inventories= 300 3500 Inventory turnover ratio == 11. 7 300 3. The following information is given for Beta Corporation. Sales5000 Current ratio1. 4 Inventory turnover5 ratio Acid test ratio1. 0 What is the level of current liabilities? Solution: 4. Safari Inc. has profit before tax of Rs. 90 million. If the company's times interest covered ratio is 4, what is the total interest charge? Solution: PBT= Rs. 90 million PBIT Times interest covered = = 4 Interest So PBIT = 4 x Interest PBT = PBIT – interest = 4x interest- interest = 3 x interest = 90 million Therefore interest = 90/3 = Rs. 30 million 5. A has profit before tax of Rs. 0 million. If its times interest covered ratio is 6, what is the total interest charge? Solution: PBT= Rs. 40 million PBIT Times interest covered = = 6 Interest So PBIT = 6 x Interest PBIT – Interest = PBT = Rs. 40 million 6 x Interest – Interest = Rs. 40 million 5 x Interest = Rs. 40 million Hence Interest = Rs. 8 million 6. McGill Inc. h as profit before tax of Rs. 63 million. If the company's times interest covered ratio is 8, what is the total interest charge? Solution: PBT= Rs. 63 million PBIT Times interest covered = = 8 Interest So PBIT = 8 x Interest PBIT – Interest = PBT = Rs. 63 million x Interest – Interest = 7 x Interest = Rs. 63 million Hence Interest = Rs. 9 million 7. The following data applies to a firm : Interest chargesRs. 200,000 SalesRs. 6,000,000 Tax rate40 percent Net profit margin5 percent What is the firm's times interest covered ratio? Solution: Sales = Rs. 6,000,000 Net profit margin = 5 per cent Net profit = Rs. 6,000,000 x 0. 05 = 300,000 Tax rate = 40 per cent 300,000 So, Profit before tax = = Rs. 500,000 (1-. 4) Interest charge = Rs. 200,000 So Profit before interest and taxes = Rs. 700,000 Hence 700,000 Times interest covered ratio = = 3. 5 200,000 8. The following data applies to a firm: Interest chargesRs. 50,000 SalesRs. 300,000 Tax rate 25 percent Net profit margin 3 percent What is the firm's times interest covered ratio? Solution: Sales = Rs. 300,000 Net profit margin = 3 per cent Net profit = Rs. 300,000 x 0. 03 = 9,000 Tax rate = 25 per cent 9,000 So, Profit before tax = = Rs. 12,000 (1-. 25) Interest charge = Rs. 50,000 So Profit before interest and taxes = Rs. 62,000 Hence 62,000 Times interest covered ratio == 1. 24 50,000 9. The following data applies to a firm : Interest chargesRs. 10,000,000 SalesRs. 80,000,000 Tax rate 50 percent Net profit margin 10 percent What is the firm's times interest covered ratio? Solution: Sales = Rs. 80,000,000 Net profit margin = 10 per cent Net profit = Rs. 80,000,000 x 0. 1 = 8,000,000 Tax rate = 50 per cent 8,000,000 So, Profit before tax = = Rs. 16,000,000 (1-. 5) Interest charge = Rs. 10,000,000 So Profit before interest and taxes = Rs. 26,000,000 Hence 26,000,000 Times interest covered ratio == 2. 6 10,000,000 10. A firm's current assets and current liabilities are 25,000 and 18,000 respectively. How much additional funds can it borrow from banks for short term, without reducing the current ratio below 1. 5? Solution: CA = 25,000CL = 18,000 Let BB stand for bank borrowing CA+BB = 1. 35 CL+BB 25,000+BB = 1. 35 18,000+BB 1. 35x 18,000 + 1. 35 BB = 25,000 + BB 0. 35BB = 25,000- 24,300 = 700 BB = 700/0. 35 = 2,000 11. LNG’s current assets and current liabilities are 200,000 and 140,000 respectively. How much additional funds can it borrow from banks for short term, withou t reducing the current ratio below 1. 33? Solution: CA = 200,000CL = 140,000 Let BB stand for bank borrowing CA+BB = 1. 33 CL+BB 200,000+BB = 1. 33 140,000+BB 1. 33 x 140,000 + 1. 33BB = 200,000 + BB 0. 33 BB = 200,000- 186,200 = 13,800 BB =13,800/0. 33 = 41,818 12. Navneet’s current assets and current liabilities are 10,000,000 and 7,000,000 respectively. How much additional funds can it borrow from banks for short term, without reducing the current ratio below 1. 4? Solution: CA = 10,000,000CL = 7,000,,000 Let BB stand for bank borrowing CA+BB = 1. 4 CL+BB 10,000,000+BB = 1. 4 7,000,000+BB 1. 4 x 7,000,000 + 1. 4BB = 10,000,000 + BB 0. 4 BB = 10,000,000- 9,800,000 = 200,000 BB = 200,000/0. 40 = 500,000 13. A firm has total annual sales (all credit) of 25,000,000 and accounts receivable of 8,000,000. How rapidly (in how many days) must accounts receivable be collected if management wants to reduce the accounts receivable to 6,000,000? Solution: 25,000,000 Average daily credit sales = = 68,493 365 If the accounts receivable has to be reduced to 6,000,000 the ACP must be: 6,000,000 = 87. 6 days 68,493 14. A firm has total annual sales (all credit) of 1,200,000 and accounts receivable of 500,000. How rapidly (in how many days) must accounts receivable be collected if management wants to reduce the accounts receivable to 300,000? Solution: 1,200,000 Average daily credit sales = = 3287. 67 365 If the accounts receivable has to be reduced to 300,000 the ACP must be: 300,000 = 91. 3 days 3287. 67 15. A firm has total annual sales (all credit) of 100,000,000 and accounts receivable of 20,000,000. How rapidly (in how many days) must accounts receivable be collected if management wants to reduce the accounts receivable to 15,000,000? Solution: 100,000,000 Average daily credit sales = = 273,972. 6 365 If the accounts receivable has to be reduced to 15,000,000 the ACP must be: 15,000,000 = 54. 8 days 273,972. 6 16. The financial ratios of a firm are as follows. Current ratio = 1. 25 Acid-test ratio = 1. 10 Current liabilities=2000 Inventory turnover ratio=10 What is the sales of the firm? Solution: Current assets = Current liabilities x Current ratio = 2000 x 1. 25 = 2500 Current assets – Inventories = Current liabilities x Acid test ratio 2000 x 1. 10 = 2200 Inventories = 300 Sales = Inventories x Inventory turnover ratio = 300 x 10 = 3000 17. The financial ratios of a firm are as follows. Current ratio = 1. 33 Acid-test ratio = 0. 80 Current liabilities=40,000 Inventory turnover ratio=6 What is the sales of the firm? Solution: Current assets = Current liabilities x Curre nt ratio = 40,000 x 1. 33 = 53,200 Current assets – Inventories = Current liabilities x Acid test ratio = 40,000 x 0. 80 = 32,000 Inventories = 21,200 Sales = Inventories x Inventory turnover ratio = 21,200 x 6 = 127,200 18. The financial ratios of a firm are as follows. Current ratio = 1. 6 Acid-test ratio = 1. 2 Current liabilities=2,000,000 Inventory turnover ratio=5 What is the sales of the firm? Solution: Current assets = Current liabilities x Current ratio = 2,000,000 x 1. 6 = 3,200,000 Current assets – Inventories = Current liabilities x Acid test ratio = 2,000,000 x 1. 2 = 2,400,000 Inventories = 800,000 Sales = Inventories x Inventory turnover ratio = 800,000 x 5 = 4,000,000 19. Complete the balance sheet and sales data (fill in the blanks) using the following financial data: Debt/equity ratio= 0. 80 Acid-test ratio= 1. 1 Total assets turnover ratio= 2 Days' sales outstanding in Accounts receivable= 30 days Gross profit margin= 30 percent Inventory turnover ratio = 6 Balance sheet Equity capital 80,000Plant and equipment. . . . Retained earnings 50,000Inventories. . . . Short-term bank borrowings . . . . Accounts receivable. . . . Cash. . . . . . . .. . . . Sales. . . . Cost of goods sold †¦Ã¢â‚¬ ¦.. Solution: Debt/equity = 0. 80 Equity = 80,000 + 50,000 = 130,000 So Debt = Short-term bank borrowings = 0. x 130,000 = 104,000 Hence Total assets = 130,000+104,000 = 234,000 Total assets turnover ratio = 2 So Sales = 2 x 234,000 = 468,000 Gross profit margin = 30 per cent So Cost of goods sold = 0. 7 x 468,000 = 327,600 Day’s sales outstanding in accounts receivable = 30 days Sales So Accounts receivable = x 30 360 468,000 = x 30 = 39,000 360 Cost of goods sold 327,600 Inventory turnover ratio === 6 Inventory Inventory So Inventory = 54,600 As short-term bank borrowing is a current liability, Cash + Accounts receivable Acid-test ratio = Current liabilities Cash + 39,000 = = 1. 1 104 ,000 So Cash = 75,400 Plant and equipment = Total assets – Inventories – Accounts receivable – Cash = 234,000 – 54,600 – 39,000 – 75,400 = 65,000 Putting together everything we get Balance Sheet Equity capital 80,000Plant & equipment65,000 Retained earnings50,000Inventories54,600 Short-term bank borrowings 104,000Accounts receivable39,000 Cash75,400 234,000 234,000 Sales 468,000 Cost of goods sold327,600 20. Complete the balance sheet and sales data (fill in the blanks) using the following financial data: Debt/equity ratio= 0. 40 Acid-test ratio= 0. 9 Total assets turnover ratio= 2. 5 Days' sales outstanding in Accounts receivable= 25 days Gross profit margin= 25 percent Inventory turnover ratio = 8 Balance sheet Equity capital 160,000,000Plant and equipment——–Retained earnings 30,000,000Inventories †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ Short-term bank borrowings . . . †¦Ã¢â‚¬ ¦ Accounts receivable †¦.. . . . Cash . . . . . . . . . . . . Sales †¦. †¦. Cost of goods sold †¦Ã¢â‚¬ ¦. Solution: Debt/equity = 0. 40 Equity = 160,000,000 + 30,000,000 = 190,000,000 So Debt = Short-term bank borrowings = 0. 4 x 190,000,000 = 76,000,000 Hence Total assets = 190,000,000+ 76,000,000 = 266,000,000 Total assets turnover ratio = 2. 5 So Sales = 2. 5 x 266,000,000 = 665,000,000 Gross profit margin = 25 per cent So Cost of goods sold = 0. 75 x 665,000,000 = 498,750,000 Day’s sales outstanding in accounts receivable = 25 days Sales So Accounts receivable = x 25 360 665,000,000 = x 25 = 46,180,556 360 Cost of goods sold 498,750,000 Inventory turnover ratio == = 8 Inventory Inventory So Inventory = 62,343,750 As short-term bank borrowings is a current liability, Cash + Accounts receivable Acid-test ratio = Current liability Cash + 46,180,556 = = 0. 9 76,000 ,000 So Cash = 22,219,444 Plant and equipment = Total assets – Inventories – Accounts receivable – Cash 266,000,000 – 62,343,750 – 46,180,556 – 22,219,444 = 135,256,250 Putting together everything we get Balance Sheet Equity capital 160,000,000Plant & equipment 135,256,250 Retained earnings 30,000,000Inventories62,343,750 Short-term bank borrowings 76,000,000Accounts receivable46,180,556 Cash22,219,444 266,000,000 266,000,000 Sales 665,000,000 Cost of goods so ld 498,750,000 21. Complete the balance sheet and sales data (fill in the blanks) using the following financial data: Debt/equity ratio= 1. 5 Acid-test ratio= 0. 3 Total assets turnover ratio= 1. 9 Days' sales outstanding in Accounts receivable= 25 days Gross profit margin= 28 percent Inventory turnover ratio = 7 Balance sheet Equity capital 600,000Plant and equipment. . . . Retained earnings 100,000Inventories. . . . Short-term bank borrowings . . . Accounts receivable. . . . Cash. . . . . . . .. . . . Sales. . . †¦.. Cost of goods sold†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ Solution: Debt/equity = 1. 5 Equity = 600,000 + 100,000 = 700,000 So Debt = Short-term bank borrowings =1. 5 x 700,000 = 1050,000 Hence Total assets = 700,000+1050,000 = 1,750,000 Total assets turnover ratio = 1. 9 So Sales = 1. 9 x 1,750,000 = 3,325,000 Gross profit margin = 28 per cent So Cost of goods sold = 0. 2 x 3,325,000 = 2,394,000 Day’s sales outstanding in accounts receivable = 25 days Sales So Accounts receivable = x 25 360 3,325,000 = x 25 = 230,903 360 Cost of goods sold 2,394,000 Inventory turnover ratio === 7 Inventory Inventory So Inventory = 342,000 As short-term bank borrowings is a current liability , Cash + Accounts re ceivable Acid-test ratio = Current liabilities Cash + 230,903 = = 0. 3 1050 ,000 So Cash = 84,097 Plant and equipment = Total assets – Inventories – Accounts receivable – Cash = 1,750,000 – 342,000 – 230,903 – 84,097 = 1,093,000 Putting together everything we get Balance Sheet Equity capital 600,000Plant &equipment 1,093,000 Retained earnings100,000Inventories 342,000 Short-term bank borrowings 1050,000Accounts receivable 230,903 Cash 84,097 1,750,000 1,750,000 Sales 3,325,000 Cost of goods sold2,394,000 22. Compute the financial ratios for Acme Ltd. Evaluate Acme's performance with reference to the standards. Acme Limited Balance Sheet, March 31, 20X7 Liabilities and Equity Equity capital Rs. 60,000,000 Reserves and surplus45,000,000 Long-term debt72,000,000 Short-term bank borrowing40,000,000 Trade creditors30,000,000 Provisions15,000,000 Total 62,000,000 Assets Fixed assets (net) Rs. 110,000,000 Current assets Cash and bank 30,000,000 Receivables45,000,000 Inventories 61,000,000 Pre-paid expenses 10,000,000 Others 6,000,000 Total 262,000,000 Acme Limited Profit and Loss Account for the Year Ended March 31, 20X7 Net sales Rs. 320,000,000 Cost of goods sold 204,000,000 Gross profit 116,000,000 Operating expenses 50,000,000 Operating profit 66,000,000 Non-operating surplus 4,000,000 Profit before interest and tax 70,000,000 Interest 12,000,000 Profit before tax 58,000,000 Tax 20,000,000 Profit after tax 38,000,000 Dividends 4,000,000 Retained earnings 34,000,000 AcmeStandard Current ratio 1. 3 Acid-test ratio 0. 70 Debt-equity ratio 2. 0 Times interest covered ratio 4. 5 Inventory turnover ratio 5. 0 Average collection period 45 days Total assets turnover ratio 1. 5 Net profit margin ratio 8 % Earning power 20 % Return on equity 18 % Solution: For purposes of ratio analysis, we may recast the balance sheet as under. Let assume that ‘Others’ in the balance sheet represents other current assets. Liabilities and Equity Equity capital . 60,000,000 Reserves and surplus45,000,000 Long-term debt72,000,000 Short-term bank borrowing40,000,000 Total 217,000,000 Fixed assets (net) 110,000,000 Current assets Cash and bank30,000,000 Receivables45,000,000 Inventories61,000,000 Pre-paid expenses10,000,000 Others 6,000,000 152,000,000 Less: Current liabilities Trade creditors30,000,000 Provisions15,000,000 45,000,000 Net current assets 107,000,000 Total 217,000,000 Current assets (i) Current ratio = Current liabilities 152,000,000 == 1. 8 85,000,000 (Current liabilities here includes short-term bank borrowing also) Current assets – Inventories 91,000,000 (ii) Acid-test ratio = == 1. 1 Current liabilities 85,000,000 Current liabilities here includes short-term bank borrowing also) Long-term debt + Short-term bank borrowing (iii) Debt-equity ratio = Equity capital + Reserves & surplus 72,000,000 + 40,000,000 = = 1. 1 60,000,000 + 45,000,000 Profit before interest and tax (iv) Times interest coverage ratio = Interest 70,000,000 == 5. 83 12,000,000 Cost of goods sold204,000,000 (v) Inventory turnover period = = = 3. 34 Invent ory61,000,000 365 (vi) Average collection period = Net sales / Accounts receivable 365 = =51. 3 days 320,000,000/45,000,000 (vii) Total assets =Equity + Total debt =( 60,000,000 + 45,000,000 ) +(72,000,000+40,000,000) = 217,000,000 Net sales320,000,000 Total assets turnover ratio = == 1. 5 Total assets217,000,000 Profit after tax 38,000,000 (ix) Net profit margin= = = 11. 9% Net sales 320,000,000 PBIT 70,000,000 (x) Earning power = = = 32. 3 % Total assets 217,000,000 Equity earning 38,000,000 (xi) Return on equity = = = 36. 2 % Net worth 105,000,000 The comparison of the Acme’s ratios with the standard is given below AcmeStandard Current ratio 1. 8 1. 3 Acid-test ratio 1. 1 0. 7 Debt-equity ratio 1. 1 2. 0 Times interest covered ratio 5. 8 4. 5 Inventory turnover ratio 3. 3 5. 0 Average collection period 51. 3 days 45 days Total assets turnover ratio 1. 5 1. 5 Net profit margin ratio 11. 9 % 8 % Earning power 32. 3 % 20 % Return on equity 36. 2 % 18 % 23. Compute the financial ratios for Nainar Ltd. Evaluate Nainar's performance with reference to the standards. Nainar Limited Balance Sheet, March 31, 20X7 Liabilities and Equity Equity capital Rs. 100,000,000 Reserves and surplus 65,000,000 Long-term debt 140,000,000 Short-term bank borrowing 70,000,000 Trade creditors 24,000,000 Provisions 19,000,000 Total 418,000,000 Assets Fixed assets (net) Rs. 206,000,000 Current assets Cash and bank 25,000,000 Receivables 70,000,000 Inventories 85,000,000 Pre-paid expenses 20,000,000 Others 12,000,000 Total 418,000,000 Nainar Limited Profit and Loss Account for the Year Ended March 31, 20X7 Net sales Rs. 740,000,000 Cost of goods sold 520,000,000 Gross profit 220,000,000 Operating expenses 102,000,000 Operating profit 118,000,000 Non-operating surplus 12,000,000 Profit before interest and tax 130,000,000 Interest 22,000,000 Profit before tax 108,000,000 Tax 46,000,000 Profit after tax 62,000,000 Dividends 20,000,000 Retained earnings 42,000,000 NainarStandard Current ratio 1. 7 Acid-test ratio 1. 0 Debt-equity ratio 1. 4 Times interest covered ratio 5. 5 Inventory turnover ratio 6. 0 Average collection period 40 days Total assets turnover ratio 2. 0 Net profit margin ratio 8 % Earning power 30 % Return on equity 35 % Solution: For purposes of ratio analysis, we may recast the balance sheet as under. Let assume that ‘Others’ in the balance sheet represents other current assets. Liabilities and Equity Equity capital 100,000,000 Reserves and surplus 65,000,000 Long-term debt 140,000,000 Short-term bank borrowing 70,000,000 Total 375,000,000 Assets Fixed assets (net) 206,000,000 Current assets Cash and bank 25,000,000 Receivables 70,000,000 Inventories 85,000,000 Pre-paid expenses 20,000,000 Others 12,000,000 212,000,000 Less: Current liabilities Trade creditors24,000,000 Provisions19,000,000 43,000,000 Net current assets 169,000,000 Total 375,000,000 Current assets (i) Current ratio = Current liabilities 212,000,000 == 1. 9 113,000,000 ( Current liabilities here includes short-term bank borrowing also) Current assets – Inventories 127,000,000 (ii) Acid-test ratio = == 1. 1 Current liabilities 113,000,000 ( Current liabilities here includes short-term bank borrowing also) Long-term debt + Short-term bank borrowing (iii) Debt-equity ratio = Equity capital + Reserves & surplus 140,000,000 + 70,000,000 = = 1. 3 100,000,000 + 65,000,000 Profit before interest and tax (iv) Times interest coverage ratio = Interest 130,000,000 == 5. 9 22,000,000 Cost of goods sold520,000,000 (v) Inventory turnover period = = = 6. 1 Inventory85,000,000 365 (vi) Average collection period = Net sales / Accounts receivable 365 = =34. 5 days 740,000,000/70,000,000 (vii) Total assets = Equity + Total debt =(100,000,000 + 65,000,000 ) +(140,000,000+70,000,000) = 375,000,000 Net sales740,000,000 Total assets turnover ratio = == 2. 0 Total assets375,000,000 Profit after tax 62,000,000 (ix) Net profit margin= = = 8. 4 % Net sales 740,000,000 PBIT 130,000,000 (x) Earning power = = = 34. 7 % Total assets 375,000,000 Equity earning 62,000,000 (xi) Return on equity = = = 37. 6 % Net worth 165,000,000 The comparison of the Nainar’s ratios with the standard is given below NainarStandard Current ratio 1. 9 1. 7 Acid-test ratio 1. 1 1. 0 Debt-equity ratio 1. 3 1. 4 Times interest covered ratio 5. 9 5. 5 Inventory turnover ratio 6. 1 6. 0 Average collection period 34. 5 days 40 days Total assets turnover ratio 2. 0 2. 0 Net profit margin ratio 8. 4 % 8 % Earning power 34. 7 % 30 % Return on equity 37. 6 % 35 % 24. The comparative balance sheets and comparative Profit and Loss accounts for Nalvar Limited, are given below: Comparative Balance Sheets, Nalvar Limited (Rs. in million) | |20X3 |20X4 |20X5 |20X6 |20X7 | |Share capital |1. 6 |1. 6 |1. |1. 8 |2 | |Reserves and surplus |1. 0 |1. 6 |2. 4 |2. 3 |3 | |Long-term debt |1. 4 |1. 5 |1. 8 |1. 6 |1. 4 | |Short-term bank borrowing |1. 3 |1. 5 |1. 7 |1. 5 |1. 2 | |Current liabilities |1. 1 |1. 3 |1. 5 |1. 6 |1. 8 | |Total |6. 4 |7. 5 |9. 2 |8. |9. 4 | |Assets | | | | | | |Net fixed assets |1. 2 |1. 4 |2 |1. 7 |2 | |Current assets | | | | | | | Cash and bank |0. 3 |0. 3 |0. 2 |0. 4 |0. 3 | | Receivables |1. 8 |2. 1 |2. 5 |2. 4 |2. | | Inventories |1. 8 |2. 2 |2. 8 |2. 4 |2. 8 | | |1. 3 |1. 5 |1. 7 |1. 9 |1. 8 | |Other assets | | | | | | |Total |6. 4 |7. 5 |9. 2 |8. 8 |9. 4 | | | | | | | | Comparative Profit and Loss Accounts, Nalvar Limited (Rs. in million) | | |20X4 |20X5 |20X6 |20X7 | | |20X3 | | | | | | | | | | | | |Net sales |3. 8 |4. 2 |5. 3 |6. 5 |7. 8 | |Cost of goods sold |2. 6 |3. |3. 9 |4 |4. 8 | |Gross profit |1. 2 |1. 1 |1. 4 |2. 5 |3 | |Operating expenses |0. 3 |0. 3 |0. 4 |0. 6 |0. 6 | |Operating profit |0. 9 |0. 8 |1 |1. 9 |2. 4 | |Non-operating surplus deficit |0. 1 |0. 2 |0. 1 |0. 3 |0. 3 | |Profit before interest and tax |1 |1 |1. |2. 2 |2. 7 | |Interest |0. 1 |0. 1 |0. 2 |0. 1 |0. 1 | |Profit before tax |0. 9 |0. 9 |0. 9 |2. 1 |2. 6 | |Tax |0. 05 |0. 08 |1 |1. 2 |1. 2 | |Profit after tax |0. 85 |0. 82 |-0. 1 |0. 9 |1. 4 | Required: Compute the important ratios for Nalvar Limited for the years 20X3-20X7. You may assume that other assets in the balance sheet represent other current assets. †¢ Current ratio †¢ Debt-equity ratio †¢ Total assets turnover ratio †¢ Net profit margin †¢ Earning power †¢ Return on equity Solution: We will rearrange the balance sheets as under for ratio analysis. It is assumed that ‘Other assets’ are other current assets |Liabilities and Equity | | | | | | |†¢ Current ratio |2. 2 |2. 2 |2. 3 |2. 3 |2. 5 | |†¢Ã‚  Ã‚  Ã‚  Debt-equity ratio |1. 0 |0. 9 |0. 8 |0. 8 |0. | |Total assets turnover ratio |0. 7 |0. 7 |0. 7 |0. 9 |1. 0 | |†¢Ã‚  Ã‚  Ã‚  Net profit margin(%) |22. 4 |19. 5 |-1. 9 |13. 8 |17. 9 | |†¢Ã‚  Ã‚  Ã‚  Earning power (%) |18. 9 |16. 1 |14. 3 |30. 6 |35. 5 | |†¢Ã‚  Ã‚  Ã‚  Return on equity (%) |32. 7 |25. 6 |-2. 4 |22. 0 |28. 0 | 26. The comparative balance sheets and comparative Profit and Loss accounts for Somani Limited, a machine tool manufacturer, are given below: Comparative Ba lance Sheets, Somani Limited (Rs. in million) | | | 20X5 | 20X6 | 20X7 | | | |20X4 | | | | | |20X3 | | | | | |Share capital |41 |50 |50 |50 |55 | |Reserves and surplus |16 |36 |72 |118 |150 | |Long-term debt |28 |25 |30 |29 |22 | |Short-term bank borrowing |35 |30 |36 |38 |38 | |Current liabilities |24 |28 |30 |30 |25 | |Total |144 |169 |218 |265 |290 | |Assets | | | | | | |Net fixed assets |72 |80 |75 |102 |103 | |Current assets | | | | | | | Cash and bank |8 |9 |15 |12 |11 | | Receivables |24 |30 |59 |62 |85 | | Inventories |35 |42 |55 |75 |79 | |Other Assets |5 |8 |14 |14 |12 | |Total |144 |169 |218 |265 |290 | | | | | | | | |Comparative Profit & Loss Account of Somani Ltd | | (Rs. n million) | | | |20X4 |20X5 |20X6 |20X7 | | |20X3 | | | | | |Net sales |285 |320 |360 |350 |355 | |Cost of goods sold |164 |150 |170 |175 |174 | |Gross profit |121 |170 |190 |175 |181 | |Operating expenses |64 |66 |68 |68 |64 | |Operating profit |57 |104 |122 |107 |117 | |Non-operating surplus defic it |3 |4 |4 |3 |3 | |Profit before interest and tax |60 |108 |126 |110 |120 | |Interest |8 |6 |10 |12 |12 | |Profit before tax |52 |102 |116 |98 |108 | |Tax |15 |26 |30 |26 |29 | |Profit after tax |37 |76 |86 |72 |79 | | | | | | | | Compute the following ratios for years 20X3-20X7: †¢ Current ratio †¢ Debt-equity ratio †¢ Total assets turnover ratio †¢ Net profit margin †¢ Earning power †¢ Return on equity For ratio analysis purpose, we will rearrange the balance sheet as under. It is assumed that ‘Other assets’ are other current assets 20X3 20X4 20X5 20X6 20X7 |Share capital | |41 | |50 | | |†¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Current ratio |1. 2 |1. 5 |2. 2 |2. 4 |3. 0 | |†¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Debt-equity ratio |1. 1 |0. 6 |0. 5 |0. 4 |0. | |†¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Total assets turnover ratio |2. 4 |2. 3 |1. 9 |1. 5 |1. 3 | |†¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Net profit margin (%) |13. 0 |23. 8 |23. 9 |20. 6 |22. 3 | |†¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Earning power (%) |50. 0 |76. 6 |67. 0 |46. 8 |45. 3 | |†¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Return on equity (%) |64. 9 |88. 4 |70. 5 |42. 9 |38. 5 | 26. The Balance sheets and Profit and Loss accounts of LKG Corporation are given below. Prepare the common size and common base financial statements |Balance Sheets (Rs. n million) | | |20Ãâ€"6 |20Ãâ€"7 | |Shareholders’ funds |256 |262 | |Loan funds |156 |212 | |Total |412 |474 | |Fixed assets |322 |330 | |Investments |15 |15 | |Net current assets |75 |129 | |Total |412 |474 | |Profit & Loss Accounts | |(Rs. n million) | | |20Ãâ€"6 |20Ãâ€"7 | |Net sales |623 |701 | |Cost of goods sold |475 |552 | |Gross profit |148 |149 | |PBIT |105 |89 | |Interest |22 |21 | |PBT |83 |68 | |Tax |41 |34 | |PAT |42 |34 | Solution: Common Size statements: Profit and Loss Account | |Regular ( in Rs. |Common Size(%) | | |million) | | | | |20Ãâ€"6 |20Ãâ€"7 | |20Ãâ€"6 |20Ãâ€"7 | |Net sales |623 |701 | |100 |100 | |Cost of goods sold |475 |552 | |76 |79 | |Gross profit |148 |149 | |24 |21 | |PBIT |105 |89 | |17 |13 | |Interest |22 |21 | |4 |3 | |PBT |83 |68 | |13 |10 | |Tax |41 |34 | |7 |5 |PAT |42 |34 | |7 |5 | | | | Balance Sheet | | |Regular ( in million)| |Common Size(%) | | |20Ãâ€"6 |20Ãâ€"7 | |20Ãâ€"6 |20Ãâ€"7 | |Shareholders' funds |256 |262 | |62 |55 | |Loan funds |156 |212 | |38 |45 | |Total |412 |474 | |100 |100 | |Fixed assets |322 |330 | |78 |70 | |Investments |15 |15 | |4 |3 | |Net current assets |75 |129 | |18 |27 | |Total |412 |474 | |100 |100 | 27. The Balance sheets and Profit and Loss accounts of Grand Limited are given below. Prepare the common size and common base financial statements Balance Sheet | | |20Ãâ€"6 |20Ãâ€"7 | |Shareholders’ fund |85 |85 | |Loan funds |125 |180 | |Total |210 |265 | |Fixed assets |127 |170 | |Investments |8 |10 | |Net current assets |75 |85 | |Total |210 |265 | |Profit & Loss Account | | |20Ãâ€"6 |20Ãâ€"7 | |Net sales 450 |560 | |Cost of goods sold |320 |410 | |Gross profit |130 |150 | |PBIT |85 |98 | |Interest |12 |17 | |PBT |73 |81 | |Tax |22 |38 | |PAT |51 |43 | Solution: |Balance Sheet |Regular (Rs. n million) |Common Size(%) | | |20Ãâ€"6 |20Ãâ€"7 |20Ãâ€"6 |20Ãâ€"7 | |Shareholders' funds |85 |85 |40 |32 | |Loan funds |125 |180 |60 |68 | |Total |210 |265 |100 |100 | |Fixed assets |127 |170 |60 |64 | |Investments |8 |10 |4 |4 | |Net current assets |75 |85 |36 |32 | |Total |210 |265 |100 |100 | |Profit & Loss Account |Regular (Rs. n million) |Common Size(%) | | |20Ãâ€"6 |20Ãâ€"7 |20Ãâ€"6 |20Ãâ€"7 | |Net sales |450 |560 |100 |100 | |Cost of goods sold |320 |410 |71 |73 | |Gross profit |130 |150 |29 |27 | |PBIT |85 |98 |19 |18 | |Interest |12 |17 |3 |3 | |PBT |73 |81 |16 |14 | |Tax |22 |38 |5 |7 | |PAT |51 |43 |11 |8 | |Common base year statements | |Balance Sheet |Regular (Rs. n million) |Common base year (%) | | |20Ãâ€"6 |20Ãâ€"7 |20Ãâ€"6 |20Ãâ€"7 | |Shareholders' funds |85 |85 |100 |100 | |Loan funds |125 |180 |100 |144 | |Total |210 |265 |100 |126 | |Fixed assets |127 |170 |100 |134 | |Investments |8 |10 |100 |125 | |Net current assets |75 |85 |100 |113 | |Total |210 |265 |100 |126 | |Profit & Loss Account |Regular (Rs. n million) |Common base year (% ) | | |20Ãâ€"6 |20Ãâ€"7 |20Ãâ€"6 |20Ãâ€"7 | |Net sales |450 |560 |100 |124 | |Cost of goods sold |320 |410 |100 |128 | |Gross profit |130 |150 |100 |115 | |PBIT |85 |98 |100 |115 | |Interest |12 |17 |100 |142 | |PBT |73 |81 |100 |111 | |Tax |22 |38 |100 |173 | |PAT |51 |43 |100 |84 | CHAPTER 5 1. The profit and loss account of Sasi Industires Limited for years 1 and 2 is given below: Using the percent of sales method, prepare the pro forma profit and loss account for year 3. Assume that the sales will be 3500 in year 3. If dividends are raised to 40, what amount of retained earnings can be expected for year 3? |Year | | |1 |2 | |Net sales |2300 |2700 | |Cost of goods sold |1760 |2000 | |Gross profit |540 |700 | |Selling expenses |150 |180 | |General and administration expenses |120 |124 | |Depreciation |94 |84 | |Operating profit |176 |312 | |Non-operating surplus deficit |12 |10 | |Earnings before interest and tax |188 |322 | |Interest |30 |38 | |Earnings before tax |158 |284 | |Tax |56 |96 | |Earnings after tax |102 |188 | |Dividends |35 |35 | |Retained earnings |67 |153 | Solution: |Year | | | | |1 |2 |Average percent |Proforma Profit & Loss| | | | |of sales |account for year 3 | | | | | |assuming sales of 3500| |Net sales |2300 |2700 |100 |3500 | |Cost of goods sold |1760 |2000 |75. 30 |2635. 43 | |Gross profit |540 |700 |24. 70 |864. 57 | |Selling expenses |150 |180 |6. 59 |230. 80 | |General and administration expenses |120 |124 |4. 90 |171. 7 | |Depreciation |94 |84 |3. 60 |125. 97 | |Operating profit |176 |312 |9. 60 |336. 14 | |Non-operating surplus deficit |12 |10 |0. 45 |15. 61 | |Earnings before interest and tax |188 |322 |10. 05 |351. 75 | |Interest |30 |38 |1. 36 |47. 46 | |Earnings before tax |158 |284 |8. 69 |304. 29 | |Tax |56 |96 |3. 00 |104. 3 | |Earnings after tax |102 |188 |5. 70 |199. 46 | |Dividends(given) |35 |35 | |40 | |Retained earnings |67 |153 | |159. 46 | 2. The profit and loss account of KG Electronics Limited for years 1 and 2 is given below: Using the percent of sales method, prepare the pro forma profit and loss account for year 3. Assume that the sales will be 26,000 in year 3. If dividends are raised to 500, what amount of retained earnings can be expected for year3 . |Year | | |1 |2 | |Net sales |18,230 |22,460 | |Cost of goods sold |13,210 |16100 | |Gross profit |5020 |6360 | |Selling expenses |820 |890 | |General and administration expenses