Q1 kay corporation is engaged in the furniture, Ask an Expert

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Q1. Kay Corporation is engaged in the furniture manufacturing business. Following are some of the financial figures of company:

Sales Rs. 760,000

Net Profit Rs. 85,000

Total assets Turnover 0.70 times

Total Debt Ratio 0.30 times

The company wants to increase its profits but it requires more investment of Rs. 240,000 in assets for opening new branches. The company wishes to finance its new assets in equal proportion of debt and equity. There will be an increase in sales that will lead to a positive change of Rs. 21,000 in the profit of the company.

a) Calculate the ROA (Return on Assets), ROE (Return on Equity) before investment.

b) Calculate the ROA (Return on Assets), ROE (Return on Equity) after investment.

c) Compare the findings of above A & B.

d) As a manager of the company do you recommend this change or not?

Q2. Mr. Kay is a salaried person and wants to buy a house after 10 years. At that time, he would be required to have an amount of Rs. 1,500,000 for the purpose. Currently, he has Rs. 600,000 to invest. He has found an investment plan that promises to pay Rs. 1,500,000 after 10 years if he invests Rs. 600,000 now. You are required to calculate the interest rate offered by the investment plan?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91966547

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