Certified credit professionals numerical

 

Numericals:



Assets
Net Fixed Assets - 800
Inventories - 300
Preliminary Expenses - 100
Receivables - 150
Investment In Govt. Secu - 50
Total Assets - 1400
Liabilities
Equity Capital - 200
Preference Capital - 100
Term Loan - 600
Bank C/C - 400
Sundry Creditors - 100
Total Liabilities – 1400


1. Debt Equity Ratio = ?
a. 1:1
b. 1:2
c. 2:1
d. 2:3
Ans - c
Explanation :
600 / (200+100) = 2 : 1
2. Tangible Net Worth = ?
a. 100
b. 200
c. 300
d. 400
Ans - b
Explanation :
Only equity Capital i.e. = 200
3. Total Liabilities to Tangible Net Worth Ratio = ?
a. 7:2
b. 11:2
c. 13:2
d. 15:2
Ans - b
Explanation :
Total Outside Liabilities / Total Tangible Net Worth : (600+400+100) / 200 = 11 : 2
4. Current Ratio = ?
a. 1:1
b. 1:2
c. 2:1
d. 3:1
Ans - a

Explanation :
(300 + 150 + 50 ) / (400 + 100 ) = 1 : 1



Q.2

Assets

Net Fixed Assets - 265

Cash - 1

Receivables - 125

Stocks - 128

Prepaid Expenses - 1

Intangible Assets - 30

Total - 550

Liabilities

Capital + Reserves - 355

P & L Credit Balance - 7

Loan From S F C - 100

Bank Overdraft - 38

Creditors - 26

Provision of Tax - 9

Proposed Dividend - 15

Total - 550

1. Current Ratio = ?

= (1+125 +128+1) / (38+26+9+15)

= 255/88

= 2.89 : 1

2. Quick Ratio = ?

(125+1)/88

= 1.43 : 11

3. Debt Equity Ratio = ?

= LTL / Tangible NW

= 100 / (362 – 30)

= 100 / 332

= 0.30 : 1

4. Proprietary Ratio = ?

= (T NW / Tangible Assets) x 100

= [(362 - 30 ) / (550 – 30)] x 100

= (332 / 520) x 100

= 64%

5. Net Working Capital = ?

= CA - CL

= 255 - 88

= 167

6. If Net Sales is Rs.15 Lac, then What would be the Stock Turnover Ratio in Times ?

= Net Sales / Average Inventories/Stock

= 1500 / 128

= 12 times approximately

7. What is the Debtors Velocity Ratio if the sales are Rs. 15 Lac?



= (Average Debtors / Net Sales) x 12

= (125 / 1500) x 12

= 1 month

8. What is the Creditors Velocity Ratio if Purchases are Rs.10.5 Lac?

= (Average Creditors / Purchases ) x 12

= (26 / 1050) x 12

= 0.3 months

.............................................



Q.3 Current Ratio of a firm is 1 : 1. What will be the Net Working Capital ?

a. 0

b. 1

c. 100

d. 200

Ans - a

Explanation :

It suggest that the Current Assets is equal to Current Liabilities hence the NWC would be

0

(since NWC = C.A - C.L)

.............................................

Q.4 Suppose Current Ratio is 4 : 1. NWC is Rs.30,000/-. What is the amount of Current

Assets ?

a. 10000

b. 30000

c. 40000

d. 50000

Ans - c

Explanation :

Let Current Liabilities = a

4a - 1a = 30,000

a = 10,000 i.e. Current Liabilities is Rs.10,000

Hence Current Assets would be

4a = 4 x 10,000 = Rs.40,000/-

.............................................

Q.5 The amount of Term Loan installment is Rs.10000/ per month, monthly average interest

on TL is Rs.5000/-. If the amount of Depreciation is Rs.30,000/- p.a. and PAT is

Rs.2,70,000/-. What would be the DSCR ?

a. 1

b. 1.5

c. 2

d. 2.5

Ans - C

Explanation :

DSCR = (PAT + Depr + Annual Intt.) / Annual Intt + Annual Installment

= (270000 + 30000 + 60000 ) / 60000 + 12000

= 360000 / 180000

= 2

.............................................

Q. 6     A Company has Net Worth of Rs.5 Lac, Term Liabilities of Rs.10 Lac. Fixed Assets worth

RS.16 Lac and Current Assets are Rs.25 Lac. There is no intangible Assets or other Non

Current Assets. Calculate its Net Working Capital.

a. 1 lac

b. 2 lac

c. - 1 lac





d. - 2 lac

Ans - c

Explanation :

Total Assets = 16 + 25 = Rs. 41 Lac

Total Liabilities = NW + LTL + CL = 5 + 10 + CL = 41 Lac

Current Liabilities = 41 – 15 = 26 Lac

Therefore Net Working Capital = CA – CL = 25 – 26 = (-) 1 Lac

.............................................

Q. 7  Merchandise costs - Rs. 250000, Gross Profit - Rs. 23000, Net Profit - Rs. 15000. Find

the amount of sales.

a. 227000

b. 235000

c. 265000

d. 273000

Ans - d

Explanation :

Amount of sales = Merchandise costs + Gross Profit

= 250000 + 23000

= 273000

.............................................

Q.8 Total Liabilities of a firm is Rs.100 Lac and Current Ratio is 1.5 : 1. If Fixed Assets and

Other Non Current Assets are to the tune of Rs. 70 Lac and Debt Equity Ratio being 3 :

1. What would be the Long Term Liabilities?

a. 40 Lacs

b. 60 Lacs

c. 80 Lacs

d. 100 Lacs

Ans - b

Explanation :

Total Assets = Total Liabilities = 100 Lac

Current Asset = Total Assets - Non Current Assets

= Rs. 100 L - Rs. 70 L

= Rs. 30 L

If the Current Ratio is 1.5 : 1

then Current Liabilities works out to be Rs. 20 Lac.

That means, Net Worth + Long Term Liabilities = Rs. 80 Lacs.

If the Debt Equity Ratio is 3 : 1,

then Debt works out to be Rs. 60 Lacs and equity Rs. 20 Lacs.

Therefore the Long Term Liabilities would be Rs.60 Lac.

.............................................

Q.9 Current Ratio = 1.2 : 1.

Total of balance sheet being Rs.22 Lac.

The amount of Fixed Assets + Non Current Assets is Rs. 10 Lac.

What would be the Current Liabilities?

a. 10 Lacs

b. b. 12 Lacs

c. 16 Lacs

d. 22 Lacs

Ans - a

Explanation :

Total Assets is Rs.22 Lac.

Fixed Assets + Non Current Assets is Rs. 10 Lac

Then Current Assets = 22 – 10 = Rs. 12 Lac.

Current Ratio = 1.2 : 1

Current Liabilities = Rs. 10 Lac

.............................................







Q.10 M/s Raj&co's balance sheet included the following accounts:

Cash: 10,000

Accounts Receivable: 5,000

Inventory: 5,000

Stock Investments: 1,000

Prepaid taxes: 500

Current Liabilities: 15,000

Find the Quick Ratio

Quick Ratio = Cash + Cash Equivalents + Short Term Investments + Marketable

Securities + Accounts Receivable) / Current Liabilities

= (10000+5000+1000) / 15000

= 16000 / 15000

= 1.07

.................................

Q.11 M/s Raj&co's balance sheet included the following accounts:

Inventory : 5,000

Prepaid taxes : 500

Total Current Assets : 21,500

Current Liabilities : 15,000

Find the Quick Ratio

Quick Ratio = (Current assets – Inventory - Advances - Prepayments Current Liabilities) /

Current Liabilities

= (21500 - 5000 - 500) / 15000

= 16000 / 15000

= 1.07

.................................

Q.12 XYZ Pvt Ltd has the following assets and liabilities as on 31st March 2015 (in Lakhs) :

Non Current Assets

Goodwill 75

Fixed Assets 75

Current Assets

Cash in hand 25

Cash in bank 50

Short term investments 45

Inventory 25

Receivable 100

Current Liabilities

Trade payables 100

Income tax payables 60

Non Current Liabilities

Bank Loan 50

Deferred tax payable 25

Find the Quick Ratio

Quick Ratio = (Cash in hand + Cash at Bank + Receivables + Marketable Securities) /



Current Liabilities

= (25+50+45+100) / 160

= 220 / 160

= 1.375

.................................





Q.14 GHI Ltd. manufacturers two products :Product G and Product H. The Variable cost of the manufacture is as

follows:

Product G Product H

Direct Material 3 10

Direct Labour (Rs.6 per hour) 18 12

Variable Overhead 4 4

Product G sells for Rs.40 and Product H at Rs.30. During the month of January, the Company is having

only 21000 of direct labour. The maximum production capacity of Product G is 5000 units and Product H is

10000 units.

From the above facts, answer the following:

I. The contribution from Product G and H together is-----

a) Rs.32

b) Rs.19

c) Rs.27

d) Rs.40

II. The contribution per labour hour from Product H is-----

e) Rs. 4

f) Rs. 2

g) Rs. 3

h) Rs. 5

III. The contribution per labour hour from Product G is-----

a) Rs.2

b) Rs.5

c) Rs.15

d) Rs.3





Q.15 Read the following and answer

Cost / unit

Raw material 50

Direct labour 20

Overheads 40

Total cost 110

No. of units 10,000

No. of units

Sold on credit 8000

Average raw material in stock : 1 month

Average work in progress : ½ month

Average finished goods in stock : ½ month

Credit by supplier : 1 month

Credit to debtor : 2 months

Take 1 year = 12 months

1) Investment of working capital in raw material inventory is

(a) 41666

(b) 50000

(c) 33333

(d) 10000

2) Investment in working capital for finished goods is

a) 45833

b) 49090

c) 56453

d) 50000

Terms used in Financial statement analysis

 

Terms used inFinancial statement analysis

1		Net Sales		Gross Sales minus returns, discounts, excise duty.
2		Raw Materials consumed		Opening Stock of raw materials plus purchases of raw materials less Closing stock of raw
				material .
3		Cost of Production		Raw materials consumed, stores and spares consumed, power and fuel, direct labour,
				repairs and maintenance, other manufacturing expenses and depredation plus opening
				stock of stock in process minus dosing stock of stock in process.
4		Cost of Sales	Cost of production (3) plus opening stock of finished goods minus dosing stock of finished
				goods.
5		Gross Profit		Net Sales - Cost of Sales (Item 1 minus Item 4)
6		Operating Profit		Gross Profit (5) minus interest, selling general and administrative expenses.
7		Net Profit before tax		Operating profit plus other incomes minus other expenses
8		Net Profit after tax		Profit before taxation minus provision for taxes.
9		Retained Profit		Net profit minus dividend paid / dedared
10		Cash Profit		Profit before charging Depreciation (Net Profit + Depredation)
11		Cash-Loss		Loss before charging Depredation (Net Loss — Depredation)
_12		Assets	Things owned by a business Not converted into cash in normal course of business, These
13		Fixed Assets		are acquired to use them in the production of other goods and services.
14		Current Assets		Assets which are meant to be converted into cash or consumed in normal course of
				business say within 1 year. These are also called as gross working capital.

15         Intangible assets               Expenditure on invisible assets, likely to yield benefit to the company in future                                                                                        e.g

		goodwill, patent, trade marks, designs.
16	Fictitious Assets	Which have notional value only e.g. losses, preliminary expenses.

         Miscellaneous Assets or Non current Which can't be classified as current, fixed or intangible e.g. inter Corporate investment assets

18	Tangible Assets	Total asset side of balance sheet minus intangible assets.
19	Quick Assets	Assets which can be converted to cash quickly. Cash, bank balances, marketable
		investments, bills receivables and sundry debtors considered goal. (Current Assets
		minus-Inventories & Prepaid Expenses)
20	Liabilities	Things owed by the business.
21	Owners Equity (Net	Paid up share capital, reserves and surplus, preference shares with more than 12 years
	Worth)	maturity.
22	Long term liabilities or Debt	Outsiders funds, payable in more than 12 months. Term loan (exduding instalment
		payable within 12 months) plus debentures maturing within more than one year,
		preference shares redeemable within 12years, deposits payable beyond one year.
23	Current Liabilities	Liabilities which are payable in less than one year e.g. sundry creditors, unsecured loans,
		advances from customers, interest accrued but not due, dividends payable, statutory
		liabilities, provisions, Bank borrowings for working capital etc
24	Total Outside Liabilities	Total of the liability side of balance sheet minus net worth
25	Tangible Net Worth	Total tangible assets minus total outside liabilities. Owner's funds minus Intangible &
		Fictitious assets ; Paid up capital plus reserves minus intangible assets
26	Gross Working Capital	Total of Current Assets
27	Net Working Capital	Current assets minus total current liabilities. Long Term Sources minus long term uses
28	Working Capital gap	Current Assets minus current liabilities other than Bank Borrowings.
29	Long term sources	Paid up capital, reserves and surplus (excluding specific reserves) i.e. Net Worth and long
		term liabilities.
30	Short Term Sources	Current Liabilities
31	Long Term Uses	Fixed Assets, Miscellaneous or Non. current assets, Intangible and Fictitious Assets
		(assets other than current assets)
32	Short Term Uses	Current Assets
33	Contingent Liabilities	Likely liability which may or may not arise on the happening or non happening of an
		event

CLASSIFICATION AS NPA

              CLASSIFICATION AS NPA     

Term Loan	If Interest and/ or instalment of principal remain overdue for aperiod of more than 90 days
CC/	if the account remains 'out of order or the limit is not renewed/reviewed within180 days from the
Credit/overdraft	due date of renewal. Out of order means an account where (i) the balance is continuously more
	than the sanctioned limit or drawing power OR (ii) where as on the date of Balance Sheet, there is
Bills	no credit in the account continuously for 90 days or credit is less than interest debited OR (iii)
	where stock statement not received for 3 months or more.  if the bill remains overdue for a
Agricultural accounts	(I) if loan has been granted for short duration crop: interest and/or instalment of principal
	remains overdue for two crop seasons beyond the due date.
	(ii) if loan has been granted for long duration crop: interest and/or instalment of principal remains
	overdue for one crop season beyond due date.
	(iii)Decision about crop duration to be taken by SLBC.
Loan against FD, NSC,	Advances against term deposits, NSCs eligible for surrender, IVPs, KVPs and life policies not
KVP, LIP	treated as NPAs provided sufficient margin is available. Advances against gold
	ornaments, govt securities and all other securities are not covered by this exemption
Loan  guaranteed  by	Loan guaranteed by Central Govt not treated as NPA for asset classification and provisioning till
Government	the Government repudiates its guarantee when invoked. Treated as NPA for income recognition.
	Advances guaranteed by the State Government classified as NPA as in other cases
Consortium advances	Asset classification of accounts under consortium should be based on the record of recovery of
	the individual member banks.

Sole , Multiple Banking Arrangement, Consortium Lending, Syndication

Sole , Multiple Banking Arrangement, Consortium Lending, Syndication  

Sole Banking Arrangement: Sole banking arrangement is a lending by single bank to a large borrower, subject to the resources available with it and limited to the exposure limits imposed by the Reserve Bank of India. Many a times when you propose to approach to new bank for funding, they propose for sole banking that their complete banking should be transferred to their bank. This is done for two reasons one is to get complete business and second is very important is having complete monitoring of fund flow and cash flow of the firm.

 Multiple Banking Arrangement, Consortium Lending, Syndication: Multiple Banking: When the credit requirements of a borrower are beyond the capacity of a single bank or that the bank does not want to take more exposure on a particular borrower, he may then resort to multiple banking. It is an arrangement where a borrower borrows simultaneously from more than one bank independent of each other, under separate loan documents with each bank. Securities are charged to each bank separately. Remember, this is different from Consortium and Syndication

Consortium lending
Consortium lending also called joint financing or participation financing. It is a system of financial emerged due to consequential increase in demand for funds of substantial magnitude and inability of individual banks to take care of the entire fund requirement
of large borrowers. The system of consortium lending provides scope and opportunity to share risk amongst banks. The system is considered to be mutually beneficial to the banks as well as customers. Under multiple banking, there is no coordination among banks regarding appraisal, documentation, other terms and advances. In such a situation borrowers got the upper hand by playing one bank against the other. It was, therefore, necessary to formalize these credit arrangements to safeguard the interest of the banks. It is mainly catered in case of large corporate and certain mid-sized borrowers.

Syndication Lending
 Reserve Bank of India has permitted the banks to adopt syndication route to provide credit in lieu of consortium advance. A syndication credit differs from consortium advance. A syndicated credit differs from consortium advances in certain aspects.

The salient features of a syndicated credit are as follows:

 1. It is an agreement between two or more banks to provide a borrower a credit facility using common documents of the borrower.

2. The prospective borrower gives a mandate to a bank, commonly referred as a lead bank (lead manager), to arrange credit on his behalf. The mandate gives the commercial terms of the credit and the prerogatives of the mandated bank in resolving contentious issue in the course of the transaction of complete syndication.

3. The mandated bank prepares an information Memorandum about the borrower in consultation with the latter and distributes the same among st the prospective banks, inviting them to participate in the credit proposal.

What is a 'Syndicated Loan'
A syndicated loan, also known as a syndicated bank facility, is a loan offered by a group of lenders – referred to as a syndicate – who work together to provide funds for a single borrower. The borrower could be a corporation, a large project or a sovereignty, such as a government. The loan can involve a fixed amount of funds, a credit line or a combination of the two.