Financial Institutions and Market
NMIMS Solution-Dec 17
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Q1. The following is the Trial Balance as on 31st March 2017 prepared by GSA Ltd. (Rs. in crores)
Particulars Debit ( ) Credit ( )
Cash on hand 50
Cash at bank 1,250
Loan taken on mortgage 1,000
Land & building 3,000
Rates & taxes 40
Carriage inwards 260
Carriage outwards 250
Legal expenses 200
Total 17,500 17,500
However the auditors of GSA Ltd. did not approve of this trial balance. You are required to rectify and prepare the new trial balance. Justify your answer as to which errors can be detected through the trial balance.
Q2. Classify the following into revenue, capital and deferred revenue expenditure and interpret your results: (10 Marks)
- Amortisation of Patents
- Goodwill of another business acquired
- Underwriting commission paid in a public issue of company’s shares
- Loss on sale of Plant and Machinery
- Cost of market research of a new product
- Purchase of second-hand laptops for office use
Q3. Following are the balance sheets of Suzuki Ltd. & Honda Ltd. as on 31st March 2017 together with the additional information for the year ended on that date:
|Liabilities||Suzuki Ltd.||Honda Ltd.||Assets||Suzuki Ltd.||Honda Ltd.|
|Profit & Loss
|9% Debentures||3,50,000||2,50,000||Office premises||10,27,000||19,00,000|
|Provision for tax||20,000||15,000||Miscellaneous
Additional Information (Extract of Profit & Loss A/c)
Particulars Suzuki Ltd. Honda Ltd.
Sales for the year 8,40,000 10,50,000
Stock on 31st March 2016 60,000 1,07,000
Gross Profit 2,10,000 2,50,000
Administrative expenses 55,000 65,000
Selling expenses 23,000 58,000
Net profit (after tax) 85,000 87,000
Market price of Suzuki Ltd. Rs. 23 per share and Honda Rs. 28 per share. Dividend paid by Suzuki Ltd. 9.5% p.a. and Honda is 9.8% p.a.
- A) Compute any three relevant ratios and comment upon the solvency and financial stability of the two companies. (5 Marks)
- B) Which company would you recommend for investment? (Support your answers with the computation of any three relevant ratios). (5 Marks)