Corporate Governance and Ethics in Financial Management

Financial Management
1

Part A:
Particulars 2016 2017 2018
Earnings Before Interest and Tax
12,08,00
0 12,81,000 13,05,000
Less: Interest Expense
10,77,00
0 12,15,000 12,47,000
Profit before tax 1,31,000 66,000 58,000
Tax Expense 39,000 20,000 17,000
Profit after tax 92,000 46,000 41,000
Dividend 46,000 23,000 20,000
Number of Shares
20,00,00
0 20,00,000 20,50,000
Earnings per share 0.046 0.023 0.020
PE ratio 11.160 8.390 7.660
Price per share (EPS*PE) 0.513 0.193 0.153
Market Capitalisation (number of shares*price)
10,26,72
0 3,85,940 3,14,060
Therefore, the price of share as on 30th June 2018 is $0.153 per share; also the market cap as
on the same date is $314060.
Calculation of current and quick ratio:
Current
ratio = Current asset
Current Liability
Quick
Ratio = Current Asset - Inventory
Current liability - Bank OD
Particulars 2016 2017 2018
Current Assets
2

Cash 3,42,000 3,44,000 2,81,000
Accounts Receivable 43,46,000 48,92,000 52,39,000
Inventory 64,83,000 71,96,000 80,13,000
Total current assets 111,71,000 124,32,000 135,33,000
Current Liabilities
Bank Overdraft 14,000 - 65,000
Accounts Payable 62,24,000 41,67,000 39,82,000
Total current liabilities 62,38,000 41,67,000 40,47,000
Current ratio 1.79 2.98 3.34
Quick Ratio 0.75 1.26 1.39
The most appropriate solvency ratio that is considered is, is 2 times. The company has shown
gradual increase in the solvency position of the company. The solvency position of the
company is strong. It indicates high liquidity for the company.
Profitability of the company
Net profit
margin = Profit after tax
Sales
Particulars 2016 2017 2018
Sales 38222000 39258000 40592000
Profit after tax 92000 46000 41000
Net profit margin 0.24 0.12 0.10
The net profit of the company is has been declining. The margin for profit of the company is
very low, steps in order to ensure minimise cost should be taken for earning higher net profit
margin.
3