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    New Doc 08 Apr 2021 19.15

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    New Doc 08 Apr 2021 19.15

    Uploaded by

    harshrathore17579
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    Fm

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    New-doc-08-Apr-2021-19.15

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    7 views2 pages

    New Doc 08 Apr 2021 19.15

    Uploaded by

    harshrathore17579
    Fm

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Download as pdf
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    Question 25 The net sales of A Ltd. is € 30 crores. Earnings before interest and tax of the company as, percentage of net sales is 12%. The capital employed comprises & 10 crores of equity, €2 crores of 13% Cumulative Preference Share Capital and 15% Debentures of z 6 crores. Income-tax rate is 40%. ‘ i. Calculate the Return-on-equity for the company and indicate its segments due to the presence of Preference Share Capital and Borrowing (Debentures). ij. Calculate the Operating Leverage of the Company given that combined leverage is 3, Answer: Net Sales : %30 crores EBIT = 12% on sales = % 3.6 crores EBIT: =— 35 _ 190 =20% Return on Capital Employed (pre-tax) “Copia Employed “TOcEs i, After tax it will be = 20% (1 - 0.4)= 12 %. aie | Particulars: "36/10 100 = 13.6% [Return on equity = nana ES 6h, at gue © the _presence of Pi nce Share capital and Borror ing gl ent stents) og que to preference capital: (12% -13%) 2 Crore=-2% et ct KOE S que to Debentures: (12% - 9%) * % 6 Crores = 18 % 418 % = 16 % (after tax) = 15% (1-0.4) = 9% “td jebenture EBIT _3.6_ EBT 27 Combined Leverage = FL = OL 3=133« OL Or, OL= aoa Or, Operating Leverage = 2.26 i, Financial Leverage ae NR RN

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