Particulars | Rs | Rs |
Total purchase price Less: Cash acquired Accounts receivable Other identifiable assets (estimated) Goodwill |
50,000 60,000 11,00,000 | 15,00,000
12,10,000 |
| 2,90,000 |
Liabilities | Rs | Assets | Rs | Rs |
Preference Share Capital | 5,00,000 | Fixed Assets: Cost | 50,00,000 |
|
Equity Share Capital | 20,00,000 | Depreciation | 30,00,000 | 20,00,000 |
Reserves and Surplus | 25,00,000 | Capital Work-in Progress |
| 40,00,000 |
Long-term Loans | 27,00,000 | Investment 10% | 5,00,000 | |
Current Liabilities and Provisions | 15,00,000 | Current Assets | 25,00,000 | |
|
| Underwriting Commission | 2,00,000 | |
| 92,00,000 |
|
| 92,00,000 |
Particulars | Rs | Particulars | Rs |
1000, 8% Preference Shares of Rs 100 |
| Buildings | 70,000 |
each fully paid | 1,00,000 | Furniture | 3,000 |
4,000 Equity Shares of Rs 100 fully paid | 4,00,000 | Stock (Market value) | 4,50,000 |
Reserves | 1,50,000 | Investment at cost (face value 4,00,000) | 3,35,000 |
Profit and Loss account | 5,10,000 | Debtors | 2,80,000 |
Creditors | 48,000 | Bank | 60,000 |
|
| Preliminary Expenditure | 10,000 |
| 12,08,000 |
| 12,08,000 |
Valuation of Equity Share | Intrinsic Value Method |
Building | 3,50,000 |
Furniture | 3,000 |
Stock | 4,50,000 |
Investment | 3,35,000 |
Debtors | 2,80,000 |
Bank | 60,000 |
Total Assets | 14,78,000 |
Less: Creditors | (48,000) |
Net Assets | 14,30,000 |
Less: Preference Share Capital | (1,00,000) |
Assets Available for Equity Shareholders | 13,30,000 |
Intrinsic Value of Shares |
| Rs
|
6% Preference Share Capital (450 × 10) |
| 45,000 |
Equity Shares (4,500 × 10) |
| 45,000 |
Reserves and Surplus |
| 3,500 |
External Liabilities |
| 7,500 |
Total Liabilities |
| 1,01,000 |
As Total Liabilities = Total Assets |
|
|
Total Assets |
| 1,01,000 |
Less: Fictitious Assets | (350) |
|
External Liabilities | (7,500) |
|
Preference Shares | (45,000) | 52,850 |
Net Assets Available for Equity Shareholders |
| 48.150 |
Yield Basic | 10.70 |
Average profit after taxation | 8,500 |
Transfer to General Reserves (10%) | (850) |
| 7,650 |
Less: Preference dividend (6% of 45,000) | (2,700) |
Profit available to equity shareholders | 4,950 |
Equity Share Capital | 5,00,000 |
11% Preference Share Capital | 3,00,000 |
12% Secured Debentures | 4,00,000 |
Reserves | 3,00,000 |
Particulars | Rs |
Average profit of the companies before interest and tax | 4,00,000 |
Less: Debenture interest (12% of 4,00,000) | 48,000 |
Profit after interest but before tax | 3,52,000 |
Less: Tax @ 45% | 1,58,400 |
Profit after Interest and Tax | 1,93,600 |
Particulars | Rs | Particulars | Rs |
Equity shares Reserve | 5,00,000 3,00,000 | Preference shares Debentures | 3,00,000 4,00,000 |
8,00,000 | 7,00,000 |
8,00,000 x 100 = 114.28%7,00,000Ratio is less than the Prescribed Ratio of 150%.(c) Yield on Profit:
Particulars | Rs | Rs |
Average Profit after Interest and Tax |
| 1,93,000 |
Less: Preference Dividend (11% of 3,30,000) | 33,000 |
|
18% Equity Dividend (Regularly Paying) = 5,00,000x18/100 |
90,000 |
1,23,000 |
:. Undistributed profits |
| 70,600 |
:. Yield = 60% of Distributed Profit = 60% of 90,000 | 54,000 | |
5% of on undistributed profit | 3,530 | |
| 57,530 |
|
Particulars | Rs | Particulars | Rs |
800 Equity shares of 100 each | 80,000 | Land and Building | 50,000 |
4,000 Preference shares of Rs 10 each | 40,000 | Plant and Machinery | 60,000 |
6% Debentures | 20,000 | Patents | 20,000 |
Sundry Creditors | 40,000 | Sundry Debtors | 30,000 |
|
| WIP and Stock | 50,000 |
|
| Cash and Bank | 10,000 |
| 2,20,000 |
| 2,20,000 |
Year | Profit before Tax | Tax |
2005 | 30,000 | 8,000 |
2006 | 40,000 | 16,000 |
2007 | 10,000 | (Strike) 4,000 |
2008 | 50,000 | 23,000 |
2009 | 55,000 | 30,000 |
Year | Weights | Profit | Product |
2005 | 1 | 30,000 | 30,000 |
2006 | 2 | 40,000 | 80,000 |
2007 | (abnormal due to strike) | ||
2008 | 3 | 50,000 | 1,50,000 |
2009 | 4 | 55,000 | 2,20,000 |
| 10 |
| 4,80,000 |
Particulars | Rs |
Weighted Average Profit | 48,000 |
Less: Increase in the Managerial Remuneration (10,000 – 6,000) | 4,000 |
| 44,000 |
Less: Tax (assuming 50%) | 22,000 |
Profits available for distribution | 22,000 |
Less: Plant Rehabilitation Reserve | 3,300 |
| 18,700 |
Less: Preference Dividend (9% of Rs 40,000) | 3,600 |
| 15,100 |
Tangible Trading Asset | Rs | Rs |
Land and Building |
| 90,000 |
Plant and Machinery |
| 60,000 |
Patents |
| 20,000 |
Sundry Debtors |
| 30,000 |
WIP and Stock |
| 50,000 |
Cash and Bank |
| 10,000 |
|
| 2,60,000 |
Less: Sundry Creditors | 40,000 |
|
Preference Share Capital | 40,000 |
|
6% Debentures | 20,000 | 1,00,000 |
Net assets available for equity shareholders |
| 1,60,000 |
Dividend Rate: Normal Dividend Rate |
8.0% |
Less: For higher dividend rate of 9% | (0.5%) |
For higher asset backing (2 times compared to 1.5) | (0.5%) |
| 7.0% |
Liabilities | Rs | Assets | Rs |
Share Capital: Authorised |
| Fixed Assets:
Land and Building Plant and Machinery Furniture Current Assets: Stock in Trade Debtors Cash and Bank Balance Miscellaneous Expenditure: Deferred Advertising Expenses |
|
50,000 8% Cumulative Preference Shares of Rs 10 each | 5,00,000 | 2,20,000 | |
40,000 Equity Shares of Rs 10 each | 4,00,000 | 4,40,000 | |
|
| 80,000 | |
Issued and Fully Paid up: |
|
| |
40,000 8% Cumulative Preference |
| 3,10,000 | |
Shares of Rs 10 each | 4,00,000 | 3,50,000 | |
30,000 Equity shares of Rs 10 each | 3,00,000 | 1,70,000 | |
General Reserve | 1,10,000 |
| |
Profit and Loss A/c | 1,00,000 |
| |
Current Liabilities and Provision: |
|
| |
Current Liabilities | 1,00,000 | 70,000 | |
Provision for Depreciation | 4,55,000 |
| |
Provision for Taxation | 90,000 |
| |
Proposed Dividend | 85,000 |
| |
| 16,40,000 | 16,40,000 |
Year | Turnover Rs | Net Profit Rs | % of Dividend on Equity Shares |
2009-2010 | 31,20,000 | 3,05,000 | 15% |
2010-2011 | 40,44,000 | 4,50,000 | 15% |
2011-2012 | 50,00,000 | 5,60,000 | 18% |
Particulars | Rs | Rs |
Land and Building |
| 2,20,000 |
Plant and Machinery |
| 4,40,000 |
Furniture |
| 80,000 |
Stock |
| 3,10,000 |
Debtors |
| 3,50,000 |
Cash and Bank |
| 1,70,000 |
Less: Current Liabilities | 1,00,000 |
|
Provision for Depreciation | 1,55,000 |
|
Provision for Tax Proposed Dividend | 90,000 85,000 |
7,30,000 |
|
| 8,40,000 |
Less: Preference Sheet Capital | 4,00,000 | |
Assets available for equity shareholders | 4,40,000 |
3,05,000 + 4,50,000 + 5,60,0003= 13,15,0003= Rs 4,38,333. Average Profit of Earning = 4,06,383/3,00,000 x 100 = 135.44% Value of Equity Share = Average Rate of Return x paid up value of shares Normal Rate of Return = 135.44/12 x 100 = Rs 112.87(Earning Basis) Value of Equity Share = Average Rate of Dividend x paid up value of shares Normal Rate of Return = (15+15+18)/3 x 10 12 = Rs 13.33 Q8) On 31st March, 2012, the Balance Sheet of Gomati Ltd. was as follows.
Liabilities | Rs | Assets | Rs | |
Share Capital Authorised 20,000 equity shares of Rs 100 each Issued and paid up 15,000 equity shares of Rs 100 each Less: Calls in arrears at Rs 20 each Profit and Loss Account Bank Overdraft Creditors Provision for Taxation Proposed Dividend Total |
15,00,000
(2,000) |
20,00,000
14,98,000 1,54,500 32,000 1,15,500 67,500 1,12,500 | Land and Buildings Plant and Machinery Stock Sundry Debtors Cash Bank | 3,00,000 1,72,500 4,50,000 9,07,500 20,000 1,30,000 |
| ||||
19,80,000 | 19,80,000 |
Year Ended | Rs |
31st March, 2012 | 1,72,500 |
31st March, 2011 | 1,50,000 |
31st March, 2010 | 1,87,500 |
31st March, 2009 | 1,80,000 |
31st March, 2008 | 1,35,000 |
Revised value of all assets |
| ||||||
Land & Building | 3,75,0000 | ||||||
Machinery | 2,25,000 | ||||||
Stock | 4,50,000 | ||||||
Debtors | 9,07,500 | ||||||
Cash |
| 20,000 |
| ||||
Bank |
| 1,30,000 | |||||
|
|
|
| 21,07,500 | |||
Outside Liabilities Bank O/D |
|
32,000 |
|
| |||
Creditors |
| 1,15,500 |
|
| |||
Provision for Tax |
| 67,500 |
|
| |||
Proposed Dividend |
| 1,12,500 |
|
| |||
|
|
|
| 3,27,500 | |||
Capital Employed |
|
|
| 17,80,000 | |||
Capital Employed Add: Goodwill | 17,80,000 67,800 |
Add: Calls in arrears/uncalled | 18,47,800 |
| 2,000 |
Net assets available to Equity shareholders | 18,49,800 |
1. 1,00,000 Equity Shares of Rs 100 each fully paid | Rs 1,00,00,000 |
2. 10,000 12% Preference shares of Rs 100 each fully paid | Rs 10,00,000 |
3. Securities Premium | Rs 11,50,000 |
4. Profit and Loss Account | Rs 33,58,000 |
5. General Reserve | Rs 18,85,000 |
6. Current liabilities: |
|
Creditors Rs 31,20,000 |
|
Bills Payable Rs 10,60,000 | Rs 41,80,000 |
Particulars | Rs |
Net Assets Value Capital Employed |
|
Equity Capital | 1,00,00,000 |
12% Preference Capital | 10,00,000 |
Reserves and Surplus: |
|
General Reserve | 18,85,000 |
Securities Premium | 11,50,000 |
Profit & Loss Account | 33,58,000 |
| 1,73,93,000 |
Less: Fictitious Assets | 80,000 |
Net Assets | 1,73,13,000 |
Less: Preference | 10,00,000 |
Net Assets for Equity shareholders | 1,63,13,000 |
Value per share | 163.13 |
Yield Method |
|
Average Profit after Tax | 5,85,000 |
Less: Preference Dividend (10,00,000 × 12% ) | 1,20,000 |
| 4,65,000 |
Less: Transferred to General Reserve | 1,17,000 |
| 3,48,000 |
F.M.P. for Equity Shareholders | 3,48,000 |
Rate of F.M.P. = 3,48,000/1,00,00,000 × 100 | 3.48 |
F.M.P. Value per share = Rate of F.M.P. × 100/Paid-up Equity Capital |
|
= 3.48/10 x 100 | 34.8 |
Rate of F.M.P. × Amount paid per share |
|
N.R.R. = 10% |
|
Fair Value = Net Assets + Yield Value/2 = 163.13 + 34.8/2 | 197.93 |
| 98.965 |
Liabilities | Rs (in Lakhs) | Assets | Rs (in Lakhs) |
Equity Share Capital (Rs 10 each) | 1,000 | Building | 440 |
Profit & Loss A/c | 206 | Machinery | 190 |
Bank Overdraft | 40 | Stock | 700 |
Creditors | 154 | Debtors | 310 |
Provision for Tax | 90 |
|
|
Proposed Dividend | 150 |
|
|
| 1,640 |
| 1,640 |
Year ending | Rs in Lakhs |
31-03-2007 | 170 |
31-03-2008 | 192 |
31-03-2009 | 180 |
31-03-2010 | 200 |
31-03-2011 | 190 |
Particulars | Rs | Rs |
All assets at revised values excluding Goodwill, Non-trade |
|
|
Investments and Fictitious Assets: |
|
|
Building | 500 |
|
Machinery | 300 |
|
Stock | 700 |
|
Debtors | 310 | 1,810 |
Less: All liabilities at revised values excluding Share Capital |
|
|
and Reserves & Surplus: |
|
|
Bank Overdraft | 40 |
|
Creditors | 154 |
|
Provision for Tax | 90 |
|
Proposed Dividend | 150 | 434 |
Average Capital Employed |
| 1,376 |
Average Profit for last 5 years ending 31st March | Rs |
2007 | 170 |
2008 | 192 |
2009 | 180 |
2010 | 200 |
2011 | 190 |
Total | 932 |
Particulars | Rs |
Net Assets as above | 1,376 |
Add: Goodwill | 244 |
| 1,620 |
Liabilities | Rs in Lakhs | Assets | Rs in Lakhs |
Share Capital Equity Shares of Rs 10 each | 400 | Goodwill | 70 |
Rs 10% Preference Shares of Rs 100 each | 100 | Building (Cost) | 150 |
Reserve and Surplus | 115 | Machinery(Net) | 250 |
Creditors | 183 | Inventory | 330 |
Bank Loan | 115 | Debtors | 150 |
Provision for Tax | 37 |
|
|
| 950 |
| 950 |
Year | Rs in Lakhs | % Dividend |
2003-04 | 20 (Loss) | – |
2004-05 | 68 | 18 |
2005-06 | 133 | 20 |
2006-07 | 120 | 22 |
2007-08 | 135 | 25 |
Particulars | Rs in Lakhs | Rs in Lakhs |
Assets: Building Machinery Inventory Debtors Total Assets Liabilities: Bank loan Creditors Provision |
220 250 350 165 |
985
(335) |
115 183 37 | ||
|
100 10 | 650 |
Add: Dividend Equity Preference
Less: On the Profit during the year (1/2 of Rs1,35,000) Net Tangible Assets |
110 760
(67.50) | |
| ||
692.50 |
Add: Goodwill 261.00 lakhs953.50 lakhs
Less: Preference Capital 100.00 lakhsNet Assets 853.50 lakhsNumber of shares = 40 lakhs Value per Share= Net Assets/ No of Shares = 853.50/40 = Rs 21.34 (c) Value per share on basis of earnings= ARR/NRR x paid up value per share ARR = Avg Profit/C.E x 100 = 163/692.32 x 100 = 23.53% Value per share = 23.53/16 x 10 = Rs 14.70 (d) Yield Value = Dividend per share/Normal rate x 100= 2.5/16 x 100 = 15.62% Or AlternativelyWorkings: Calculation of Capital Employed:Total Assets 985 lakhsLess: Liabilities 335 lakhs650 lakhsLess: 1/2 of Retained Earnings = 25 12.50 lakhs
637.50 lakhsAverage rate of dividend =21.25%N.R.R= 16%Normal Profit = 16% of 637.50 = Rs 102 lakh Average Profit before Tax= 114/70 x 100 = 162.85%Say 163 lakhs
Less: Normal Profit 102 lakhsSuper Profit 61 lakhs(a) Goodwill = 5 × Selling Price = 5 × 61 = 305 lakhs.(b) Value of Equity Share of Net Asset Basis:Net Assets 760 lakhsAdd: Goodwill 305 lakhs1065 lakhs
Less: Profit Capital 100 lakhsNet Assets 965 lakhs Value of Share= 965/40 = Rs 24.125 lakhs(c) Value of Equity shares on earning basis = 135-10 (Pref Div) x 10 400 = 125/400 x 10 = Rs 31.25Value per share = 31.25/16 x 10 = Rs 19.53OR= 135-10 x 100 Capital+ R&S-Deferred Revenue Exp= 125/515 x 100 = Rs 24.27 Value per share= 24.57/16 x 10 = Rs 13.28 (d) Yield Basis = Average Yield/16 x 10 = 21.25/16 x 10 = Rs 13.28