Arvind Ltd. Case Study
Autor: goude2017 • March 23, 2018 • 439 Words (2 Pages) • 501 Views
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Less: fixed cost 1187.45
EBIT 351.48
Less: interest 305.51
EBT 45.97
Computation operating Leverage:
(A) DOL = Cotrn[pic 3]
EBIT
1538.93[pic 4][pic 5]
351.48
[pic 6]
4.38
(B) DFL = EBIT[pic 7]
EBT
351.48[pic 8][pic 9][pic 10]
45.97
7.65[pic 11]
(C) DCL = DOL *DFL
= 7.65*4.38
= 33.50
- Assumption for DOL: - DOL ratio is high .Therefore, there is high risk that company may not able to cover its fixed cost.
- Assumption of DFL:- there is high financial leverage. Therefore company return on asset may not Exceed the interest on the loan. Which greatly diminishes company’s return on equity and profitability.
- Assumption of DCL: - There is high combined leverage.it indicates company is highly risky and hence we can say it is not profitable to invest this company.
Capital Structure
Particulars
Amount(in crs)
Authorized:
Equity shares(565000000*Rs.10/- per share)
Preference shares(10000000*Rs100/-per share)
Total
Issued:-
Equity shares(258243969* Rs 10/- per shares)
Total
Fully paid-up and subscribed share capital;-
Equity share(258243069*Rs 10/- per share)
Total:
Debt:-
Long Term borrowings:
(Secured)
Term Loans:
From Banks
Other financial institutions
(Unsecured)
From other Financial Institution
Total :-
565.00
100.00
665
258.24
258.24
258.24
258.24
1086.96
81.78
2.58
1171.32
Debt and Equity mix in capital structure is equity 18% and Debt. 82%.
Interest
- From Banks:-
- Rupee Loans Rs.1,223.47 lakh . 10.50% to 13% Repayable in quarterly instalments ranging between 4 to 28 with moratorium period in some of the loans.
- Hire Purchase Loan Rs 8.06 lakh . 10.25% Monthly payment of Equated Monthly Instalments beginning from the month subsequent to taking the loans.
- Foreign Currency Loans Rs.68.26 lakh. LIBOR+3.40% Repayable in 8 equal half yearly instalments starting from September 2015.
- From Financial Institutions and Others
- Rupee Loans Rs.101.04. 10.75% to 11% Repayable in equal quarterly instalments ranging between 8 to 18.
- Foreign Currency Loans Rs.15.09 lakh. LIBOR+ 3.75% Repayable in 8 equal quarterly instalments.
- Hire Purchase Loan Rs.0.09. 8.37% Monthly payment of Equated Monthly Instalments beginning from the month subsequent to taking the loans.
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