NMIMS April assignments A companys capital structure is s

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Financia
l Reporting & Analysis I

1. A company's capital structure is said to be "Complex Capital Structure" when the
company has issued FOUR types of securities and in such case the EPS is presented as Basic EPS and Diluted EPS. Which of the securities constitute the complex capital structure? Suppose that ABC Limited provides the below information pertaining to FY21: Basic EPS = INR 1.37 per share. EBIT = INR 12 millions. The company also has 11% convertible preference share capital of INR 25 millions (face value of INR 50 each).The company's applicable tax rate is 20%. Compute the basic and diluted EPS of the company for FY21. Also explain why the Diluted EPS will always be less than or equal to Basic EPS (10 Marks)

2. XYZ Ltd closes its books every year on 31-March. It reported a profit of INR 500 crores and INR 550 crores for the accounting years 2019-20 and 2020-21 respectively. The company claims that the profits of the company have increased by 10%, despite the COVID pandemic. Mr. Advik is an analyst and is keen to know if the company delivered a similar performance from the cash generation perspective by its operational activities. He collects additional information as below: Depreciation on PPE were INR 75 Crores both the years, there was a sale of a fully written down machinery on 30-Sep-2020 and the sale proceeds included INR 25 crores (adjusted for taxes) and the company had paid interests of INR 10 crores and INR 12.5 crores in FY20 and FY21 respectively (Company's policy is to treat interest costs as financing cash flow, but makes no adjustments to tax expense due to the interest component). Taxes paid were at 25% on PBT both the years. Assume that there were no changes in working capital items. Give any two reasons why companies may have higher profits in their income statement, yet show a lesser cash generation during the same period. Compute and compare the cash flow from operations of FY20 and of FY21. (10 Marks)

3. Pyramid Limited is a company that manufactures semi-finished components used in automobiles industry. You are provided below with the Summarized Balance Sheet and Summarized Income Statement along with the industry average.

Pyramid Limited
Industry
Average
Balance Sheet (in Rs. Lacs)
Particulars 2012
I. EQUITY AND LIABILITIES
(1) Shareholders' Funds
(a) Share Capital
(b) Reserves and Surplus
Total Equity
(2) Non-Current Liabilities
(a) Long-term Liabilities
(b) Other long-term Liabilities
Total Long-term Liabilities
(3) Current Liabilities
(a) Trade Payables
Total Current Liabilities
TOTAL EQUITY & LIABILITIES
II. ASSETS
(1) Non-current Assets
(a) Fixed Assets
(b) Non-current Investments
Total Non-Current Assets
(2) Current Assets
(a) Inventories
(b) Trade Receivables
(c) Cash and Bank Balances
Total Current Assets
TOTAL ASSETS


4,562.85
1,261.30
5,824.15
1,000.50
540.25
1,540.75

590.65
590.65
7,955.55

4,890.50
1,390.00
6,280.50
365.00
740.50
569.55
1,675.05
7,955.55

6,975.25
3,990.50
10,965.75
750.35
200.55
950.90

1,030.50
1,030.50
12,947.15

8,980.55
2,600.65
11,581.20
150.55
900.65
314.75
1,365.95
12,947.15

Pyramid Limited

Indsutry
Average
Income Statement (Rs. Lakhs)
Particulars 2012
REVENUES
Less: Direct Expenses (COGS)
Gross Profit
Less: Indirect Expenses
EBITDA (Cash Operating Profit)
Less: Depreciation & Amortisation
EBIT (Operating Profit)
Less: Non-Operating Expenses (Interest)
EBT (Pre-tax Profit)
Less:Taxes
PAT (Net Profit) 12,145.28
6,597.65
5,547.63
2,038.35
3,509.29
929.20
2,580.09
120.06
2,460.03
738.01
1,722.02
20,994.20
9,654.78
11,339.42
5,876.82
5,462.60
1,347.08
4,115.52
86.29
4,029.23
1,208.77
2,820.46

Additional Assumptions:
Number of Outstanding Shares (Rs. 10 each)
Dividends Paid
Market Price of Share
456.29
861.01
99.61
697.53
1,410.23
134.65

You are required to:
a. Comment on the financial performance/position of Pyramid Limited by computing the following ratios: (i) Return on Equity (ii) Return on Total Capital (iii) Operating Profit Ratio (iv) Net Profit Ratio (v) Price to Earnings Ratio (5 Marks)

b. Comment on the financial performance/position of Pyramid Limited by computing the following ratios: (i) Debt to Asset Ratio (ii) Interest Coverage Ratio (iii) Current Ratio (iv) Quick Ratio (v) Dividend Payout Ratio (5 Marks)

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