Cash flow statement

answered on 22-May-24 11:18

Financial management , study material of ICAI , On page 9.52 of module 2 , illustration 8, in cash flow statement, 50 lakh is subtracted as cash required for increase in stock. Please explain why it is subtracted , as also adjustment is done in making entry in profit and loss account of 420 lakhs of material consumed in year 3 .

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Increase in stock means increased outflow and hence a reduction in cashflow

Anirved Rahatgaonkar

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Ratio Analysis

answered on 17-May-24 14:11

Sir In Stock turnover ratio formula when to use COGS & when to use sale.

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Credit sales

Fathima Hamtha Hussaina

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Which method is to adopt in exam

answered on 10-May-24 17:21

YTM and by using cost of debt formula, Both methods are present in exam or what? Or can I use whichever is easier

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Usually formula method needs to be followed unless otherwise asked to use YTM method

Shivashankar Jawai

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About interest and discount rate while computing

answered on 10-May-24 17:24

That 10% and 15% is discount rate or interest rate I can't understanding that

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Using the concept of discounting (discount rate) the Interest rate is computed

Shivashankar Jawai

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Cost of capital

answered on 10-May-24 18:02

@CS Bala Aditya sir, I have recently watched the youtube video posted by 1fin regarding the doubt in cost of capital chapter. There I got literally confused. There in the explanation,what should be taken as net proceeds in case of debentures/pref.shares,you explained that always prefer issue price - floatation cost. Also a note has been given, that if the term "issued at par/ premium/ discount " is [not] given , assume issued at market price, then net proceeds = MP - floatation cost. My doubt is in illustration 1 of ICAI material itself. In that issue price = 103( given) Current market price= 94 ( given) Then why we have not considered issue price? And another doubt is ,the note given in the video mentions....(' issued at par/ premium/ discount 'is not given), whether this line to be considered as it is or somewhat it can be rearranged. I.e., in the illustration 1 Sona ltd.( issued )12% irredeemable debentures( @ )₹103,at ₹3 (premium).... note the (). Kindly help me to clear the doubt sir

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Whatever I had mentioned in the video, I have also referred the illustrations. The case there is about either new company or fresh issue of securities. Here, in the question you had posted, the company had raised the debentures in the past and it is trying to evaluate the cost based on today’s market scenario and hence the market price is considered.

Pravin Nesaraj

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Mock test series 1

answered on 11-May-24 21:49

#MTP Series 1 2024 In solution to question 2(a) for computation of cashflows tax shield for depreciation calculated seperately why they gave like that. whether it need to compute like this for all sums. And tax shield of capital loss that is WDV at year end (less) scrap value also calculated Does the calculation need to done wherever this model sums came?

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Thank you much for the explanation sir 🙏

Abi KVA

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Wcm

answered on 22-May-24 11:06

Why discount is not deducted here?discount In old scheme is 160 lakhs*50%*2% right.why it is not comsidered

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Because nowhere in the question have, they asked for incremental cost - all questions focus on factoring proposal only independently

Jaggu Achalla

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doubt regarding computation of cash flows after tax

answered on 07-May-24 11:02

sir, im a little confused about the terminology used in this question, the term used in the question is" earnings after tax" but you have assumed it to be cash flows after tax,will that assumption always hold true?,what if the the terminology used is profit after tax instead of earnings after tax??

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thank you sir

aravind lalji

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illustration 4 part3

answered on 06-May-24 17:22

in the projdcted p&L the RM is shown as 470..actually it is calculated as 420

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420 is the RM consumed. But as Op st of 150 & cl st of 200 is mentioned, therefore RM purchased = RMC+ cl st - op st = 400+ 200 - 150 = 470

Vidya Suresh

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relation between eps and value of firm

answered on 04-May-24 13:29

sir, i dont get it, why cant we just calculate the minimum cost of capital for the given alternatives,the option having the minimum cost of capital should maximise the firms value, right?why do we have to go for that option that maximizes eps?how can we say that maximising the eps of a firm will eventually lead to maximisation of value??

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Having the least cost is one of the factors, but not only factor to result in the highest value. Also, as per few theories irrespective of capital structure, the overall cost & the value of the firm would remain constant. Hence trying to find the optimal capital structure from the benefit pov is another approach, where EPS is the ultimate benefit left out after addressing all the finance costs. Hence it is considered as a wealth indicator. Also for the firms which are traded in the market, EPS multiplied with PE ratio gives value of MPS which is also a wealth indicator.

aravind lalji

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