PSBM – Finance Management- SmoothdriveTyre Ltd manufacturerstyres under the brand naacquired 3 years ago at a cos Analyze the financial viability of the two options

SmoothdriveTyre Ltd manufacturerstyres under

Finance Management


Case NO. 1 Cooking LPG Ltd


Cooking LPG Ltd, Gurgaon, is a private sector firm dealing in the bottling and supply of domestic LPG for household consumption since 1995. The firm has a network of distributors in the districts of Gurgaon and Faridabad. The bottling plant of the firm is located on National Highway – 8 (New Delhi – Jaipur), approx. 12 kms from Gurgaon.  The firm has been consistently performing we.”  and plans to expand its market to include the whole National Capital Region.

Q1. Determine the Working Capital

Case NO. 2  M/s Hi- Tech Electronics

M/s. Hi – tech Electronics, a consumer electronics outlet, was opened two years ago in Dwarka, New Delhi. Hard work and personal attention shown by the proprietor, Mr. Sony, has brought success.  However, because of insufficient funds to finance credit sales, the outlet accepted only cash and bank credit cards.  Mr. Sony is now considering a new policy of offering installment sales on terms of 25 per cent down payment and 25 per cent per month for three months as well as continuing to accept cash and bank credit cards.

Q1. As a financial consultant, advise the proprietor whether he should go for the extension of credit facilities.

Q2. Also prepare cash budget for one year of operation of the firm, ignoring interest. The minimum desired cash balance &Rs. 30,000, which is also the amount the firm has on January 1.  Borrowings are possible which are made at the beginning of a month and repaid at the end when cash is available.

Case NO.3 SmoothdriveTyre Ltd

SmoothdriveTyre Ltd manufacturerstyres under the brand name “Super Tread’ for the domestic car market.  It is presently using 7 machines acquired 3 years ago at a cost of Rs. 15 lakh each having a useful life of 7 years, with no salvage value.

Q1. As a finance analyst, prepare a report for submission to the CFO and the Board of Directors, explaining to them the feasibility of the new investment.

Case NO. 4 Computation of Cost of Capital of PALCO Ltd

In October 2003, Neha Kapoor, a recent MBA graduate and newly appointed assistant to the Financial Controller of Palco Ltd, was given a list of six new investment projects proposed for the following year.  It was her job to analyse these projects and to present her findings before the Board of Directors at its annual meeting to be held in 10 days.  The new project would require an investment of Rs. 2.4 crore.

Q1. From the facts outlined above, what report would Neha submit to the Board of Directors of palco Ltd ?

Case NO. 5 ARQ Ltd

 ARQ Ltd is an Indian company based in Greater Noida, which manufactures packaging materials for food items.  The company maintains a present fleet of five fiat cars and two Contessa Classic cars for its chairman, general manager and five senior managers.  The book value of the seven cars is Rs. 20,00,000 and their market value is estimated at Rs. 15,00,000.  All the cars fall under the same block of depreciation @ 25 per cent.

Q1. Analyze the financial viability of the two options.  Which option would you recommend?  Why?

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