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# FIN621 GDB Solution & Discussion Last Date:26-01-2011

Semester “FALL 2010”

“Financial Statement Analysis (FIN 621)”

This is to inform that Graded Discussion Board (GDB)

Has been opened according to the following schedule

Schedule

 Opening Date and Time January 24, 2011 At 12:01 A.M. (Mid-Night) Closing Date and Time January 26, 2011 At 11:59 P.M. (Mid-Night) Note: No extra or bonus/grace period is available for attempting GDB. Discussion Question

Suppose you are a loan officer in a bank and Econ Company Limited apply for long term loan in your bank. Your bank is providing the loan to all kinds of businesses @ 12% p.a. by analyzing the business and current scenario of the market conditions, you are much confident that the profitability rate of the company will remain same even after debt financing. The profit and loss account of the company shows net income of Rs. 105,000, sales Rs. 4,850,000, interest expense, Rs. 300,000, income tax expense Rs. 5,000 and the gross profit Rs. 4,250,000.

By considering the information given about the profitability of the company:

1.      Do you think that Econ Ltd. has the ability to pay fixed cost of borrowings NO

2.      What is the current operating profitability rate of the company 8.45%.

3.      What is the amount of operating expense 3, 84, 0000.

4.      What is the amount of operating income 4, 10,000.

Instructions:

You are NOT required to show formula or calculations. Just mention your answers in given format above. Otherwise your GDB will be graded as zero.

Instructions:

1.        Use the font style “Times New Roman” and font size “12”.

2.        Your answer should be relevant to the topic i.e. clear and concise.

3.        Do not copy or exchange your answer with other students.  Two identical / copied comments will be marked Zero (0) and may damage your grade in the course.

4.        reproducing the text from books, websites and other reading materials is strictly prohibited. Such comments will be marked as Zero (0).

Obnoxious or ignoble answer should be strictly avoided.

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### Replies to This Discussion

See the attached file by Afaaq

Attachments:
nice effort TARIQ bhai,you are genius and if you have complete working of this solution please must put.

Sale………………. ……………..     4850000

Gross profit….. ……………..      4250000

Less operating expenses ..    3840000

Operating profit  EBIT             410000

Less other expenses, interest   300000

Profit before tax EBIT                  110000

Income tax expenses                     5000

Net income                                    105000

Operating profitability rate

Operating profitability = operating profit / sales *100

= 410000 / 4850000 = 0.0845 * 100 = 8.45

Operating expenses

Operating expenses = Gross profit – operating expenses

= 4250000 – 410000 = 384000

1.      Do you think that Econ Ltd. has the ability to pay fixed cost of borrowings ________ ( NO).

2.      What is the current operating profitability rate of the company ___8.45___

3.      What is the amount of operating expense____3,84000____?

4.      What is the amount of operating income_4,10,000_____?

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