FIN630 Investment Analysis & Portfolio Management GDB no 1 fall October 2011

[Vuhelper]

1. This news will bring down the prices.
2. so existing shareholders will behave different, some will sell some will buy the shares.
3. the prices will increase on next day because the potential investors will start buying.
4. the lahore stock exchange and islamabad stock exchanges will behave in the same way. if the company is listed in these stock exchanges also. the reason is:


1 the capital market is sensitive for public information.
2 the behaviour of invertors is same for risk taking.

[Vuhelper]

Fin 630
Solution of Question no.1:-

Quick Ratio / Acid Test Ratio = (current assets – Inventory) / (current Liabilities)

Quick Ratio / Acid Test Ratio = ((937.000 + 200,000) – 212,000) / 409,000

Quick Ratio / Acid Test Ratio = (1137, 000 – 212,000) / 409,000

Quick Ratio / Acid Test Ratio = (925,000) / 409,000

Quick Ratio / Acid Test Ratio = 2.261 times

Interest coverage Ratio = EBIT / Interest expenses

Interest coverage Ratio = (50, 15,000 / 2550, 000)

Interest coverage Ratio = 19.67 %

Earnings per Share = Profit available to Shareholders / Average common shares
outstanding

Earnings per Share = (3,09,40,000 – 12,30,000) / 2000000

Earnings per Share = 14.85 Rs.

Net Profit Margin = (Net Income/ Net Sales)* 100

Net Profit Margin = (3, 09, 40,000 / 105, 000,000) * 100

Net Profit Margin = (0.477) * 100

Net Profit Margin = 29.46 %

Intrinsic Value of Stock = Future Value / Expected ROI Number of Years

Intrinsic Value of Stock = D1/(r-g)

Intrinsic Value of Stock = 5.30 / (12% - 0) 1

Intrinsic Value of Stock = 5.30/ (12-0) = 5.30/ (12%)

Intrinsic Value of Stock = 44.16

Solution of Question no.2:-

Ratio

Quick
Net Profit Margin
Interest coverage
Earnings per share

Industry Average

1.75 Times
35%
16 Times
Rs. 1.35

Company Ratio
Ranking
2.26 times
29.46 %
19.67 Times
Rs. 14.85

Ranking
(Poor / Good)
Good
Poor
Good
Good