Assignment No. 2
Bhagyanagar India Ltd.:
Bhagyanagar India Ltd. Is a company working under the telecom sector & is unified in 1985. It is a share of surana group. Nonferrous & ferrous are the major product of the company. Here, we have to analyze any one company’s balance sheet & profit and loss account of 5 years from the previous assignment to forecast the company’s working for year 2013-2014.
PROFIT & LOSS ACCOUNT |
| | | | | | | | PROJECTED |
SR.NO. | PARTICULARS | 2008-2009 | 2009-2010 | 2010-2011 | 2011-2012 | 2012-2013 | CAGR | 2013-2014 |
1) | SALES | -5.61% | -7.96% | 6.58% | 6.41% | 4.44% | 1.74% | 5.00% |
2) | EBIT | -59.08% ...view middle of the document...
13% | -17.59% | 2.77% | -48.35% | -13.67% | -17.69% | -16.00% |
| | | | | | | | |
* FINANCIAL FORECASTING FOR YEAR 2013-2014:
Forecasting for the year 2013-2014 has been done after comparing the balance sheet and profit & loss account, CAGR & PESTEL effect on the company. CAGR (Compound Annual Growth Rate) of the turnover is obtained as 1.74% and also the Profit CAGR is -17.86%. On this basis the Projected turnover for year 13-14 will be = 20676 + 1.74% = 21036.8 Lakhs.
* As the company sale the scrap & have investment activities every year, the other income of the company is getting fluctuated. On this basis other income is forecasted to increase on an average of Rs.5 lakh.
* Increasing trend is noticed in employee’s expenses since last 5 years by 2%.
* As per last year trend & current market rate, financial & interest charges of short term & long term borrowings is considered to be 12%.
* An increase in noticed of 5% every year in Trade receivables.
* 13.90% of turnover is taken to be inventories as the company practices trend of keeping inventories.
* As the company is having assets of high value, depreciation is taken to be 30% of total fixed assets. EG: Wind Mill including amortization of lease rent fixed by company of RS. 512,630/-.
* As per the laws of income tax, tax expenses are to be taken as 30.9%, tax rate to be 30% & Cess rate 3%. Asset turnover ratio will be 1.20%.
* An assumption is made that there are no prior period taxes are existing & company has no exceptional items to be debited.
* Short term provision includes bonus provision for employees of Rs.5 lakh paid every year & dividend declared to be 20%.
* As the recession hit the market & low demand from 2008 to 2011, there was a negative growth in sales. Company started to recover from 2011 from which the forecasting is that sales will have an increase of 5-6% in 2013-14. Also the company proposed about solar water heater & copper foil cable, turnover is expected to increase by Rs.20 crore.
* In 2012, company transferred its 1 windmill to its subsidiary company, % of fixed assets came down by 10%. As the company disposes of its old asset, an average projection of 1.5% is made.
* On the basis of inventories & trade receivables of the company, current asset projection is to be made. So it is taken at the CAGR rate i.e. -16.00%.
* Since the company is keeping the dividend at 20% from last 4 years, it is projected to be the same for the next year. Equity share capital will be stable.
* Borrowing is projected to be decreased by 2% next year as the company is writing off its borrowings by paying its fixed annual installments.
* As the interest expenditure of the company...