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

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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