Fundamentals of Financial Management, Third Edition

SOLVED NUMERICAL PROBLEMS

1. Prepare income statement and find out the changes in EBIT and net income in 2007–08 over 2006–07 on the basis of the following details:

   Sales during 2006–07 amounted to Rs 4,00,000 that increased by 20% in the following year. The cost of goods accounted for 60% of the sale value during 2006–07 which, on account of economy measures, slumped to 55% in the following year. Operating expenses too fell from 10% to 8% of the sale value. But the amount of interest payment rose from Rs 25,000 to Rs 30,000 in 2007–08. Tax rate was constant at 30%.

   Solution

    

   Income Statement

   	2006–07	2007–08
   Revenue from sales	4,00,000	4,80,000
   Less cost of goods	2,40,000	2,64,000
   Margin of contribution	1,60,000 ...