ACC501 ASSIGNMENT 1 SOLUTION..DUE DATE : 2 MAY 2013
After attempting this assignment, the student would be able to:
a. calculate and interpret different financial ratios.
b. understand how the decisions may affect liquidity position of a company.
ABC Company is engaged in manufacturing of electronic products since many years. It is listed at Regional Stock Exchange (RSE) and its shares are traded at Rs. 37 each currently. Capital structure of electronics industry is highly relying on debt. So, the industry average for debt to equity ratio is 60:40. Following financial statements relate to
As on December 31, 2012
- Management of the company is planning to take loan of Rs. 51 million from a local financial institution to purchase new plant for expansion in its existing plant.
- A & N Company - a buyer of ABC Company has recently made an agreement to purchase electronic products for Rs. 20 million on credit basis. The inventory for this deal will cost Rs. 11 million for ABC Company.
- Share price of the company will be increased by Rs. 3 owing to good expectations perceived by stock market investors.
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