[30] 1. MM Furniture House a renowned furniture company is planning to take over the YY Furniture Udayog known for tradi

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[30] 1. MM Furniture House a renowned furniture company is planning to take over the YY Furniture Udayog known for traditional designs of furniture products- in the market of India. The Financial Controller of MM Furniture House has obtained the computer print of the Profit and Loss a/c, Balance Sheet and other required information of YY Furniture Udayog by login on the web-site to appraise financial position. The Profit and Loss a/c and the Balance Sheets of a year have been given below: Profit and Loss a/c for the Year Sales revenue Less: Cost of goods sold Purchases Add: Beginning in inventory Less: Ending inventory Direct material consumed Wages Total cost of goods sold Gross profit Less: Operating expenses: 300,000 50,000 (80,000) 270,000 100,000 Rs 800,000 370,000 430,000
Administration expenses Depreciation Interest on debenttire Tax expenses Dividend paid Selling expenses Total operating expenses Net Income Balance Sheets Assets Land & Building at cost Plant & Machinery at cost Inventory Accounts Receivable Accumulated Depreciation Cash at Bank Share Capital Share Premium 12% Debenture Liabilities Outstanding Expenses Accounts Payable Bank Loan Retained Earning 136,000 90,000 12,000 20,000 12,000 80,000 Additional Information: Net Income of last year Permanent capital of last year Last year value added per employee Number of employee Amount 350,000 80,000 300,000 600,000 90,000 90,000 (180,000) 100,000 1,000,000 Amount 500,000 50,000 100,000 30,000 100,000 100,000 120,000 1,000,000 40,000 400,000 Rs 12,000 20
Required: Will it be reasonable to acquire YY Furniture Udayog give your comments on the basis of following ratios with standards: Value added statement a. b. Profitability measurement ratios (Net profit ratio (plus 10%) and Return on Equity (+7%)} C. Productivity measurement ratios (Wages Base (less than 3% of COGS) and Value Added per employee (high)} d. Efficiency measurement ratios (Account Receivable Turnover Ratio (more than 8 and Total Assets Turnover Ratio (more than 2 times} times) e. Stability measurement ratios (Quick Ratio (1 - 1.6 times) and Interest expense ratio (less than 25% of sales)} f. Possibility measurement ratios (Net profit increase ratio (at least 10%) and Total capital increase ratio (at least 10%)} g. Comment on the results. [6 x 3+12]