MGT201 GDB 1

Fall Semester 2011

“Financial Management (MGT201)”

This is to inform that Graded Discussion Board (GDB)

has been opened according to the following schedule

Schedule:

Opening Date and Time
October 24, 2011 At 12:01 AM

Closing Date and Time
October 27, 2011 At 11:59 PM



ABC Company is a sugar manufacturing and its position as on 31st December, 2010 is as follows:



ABC Company

Balance Sheet

As on 31st December, 2010


Assets
Rs.
Liabilities and Owner’s Equity
Rs.

Current Assets
15,468
Current Liabilities
8,521

Land & Building
179,589
Long term Debts
96,895

Plant & Machinery
253,463
Loan for plant & machinery
253,463



Equity
89,641

Total Assets
448,520
Total Liabilities
448,520






This Balance Sheet also shows that ABC Company took loan from financial institution to purchase plant & machinery for Rs. 253,463.



Keeping the given information into consideration, you are required to answer the following:



1. What would be Debt Ratio before taking loan?

2. What would be Debt Ratio after taking loan?

3. Please comment that how the change in Debt Ratio would affect the decision of the financial institution if the company requests for further loan?



Guidelines for Preparation:



For acquiring the relevant knowledge, do not rely only on handouts but watch the course video lectures, which can be downloaded for free from vu Channel - YouTube, and also use other reference books.



Important Instructions:



1. The GDB will remain open for 72 hours

2. The GDB will open and close at above specified date and time. Please note that no grace day and extra time will be given for posting comments on GDB.

3. Your discussion should not exceed 60 words (approx.).

4. Use the font style “Times New Roman” and font size “12”.

5. Your answer should be relevant to the topic i.e. clear and concise.

6. Do not copy or exchange your answer with other students. Two identical / copied comments will be marked Zero (0) and may damage your grade in the course.

7. Books, websites and other reading material may be consulted before posting your comments but copying or reproducing the text from books, websites and other reading materials is strictly prohibited. Such comments will be marked as Zero (0).

8. You should post your answer on the Graded Discussion Board (GDB), not on the Moderated Discussion Board (MDB). Both will run parallel to each other during the time specified above. Therefore, due care will be needed.

9. Obnoxious or ignoble answer should be strictly avoided.

10. You cannot participate in the discussion after the due date.

11. Questions / queries related to the content of the GDB, which may be posted by the students on MDB or via e-mail, will not be replied till the due date of the GDB is over.

12. For planning your semester activities in an organized manner, you are advised to view schedule of upcoming Assignments, Quizzes and GDBs in the overview tab of the course website on VU-LMS.

Anybody can plz share the solution [You must be registered and logged in to see this image.]

Financial Management (MGT201)
Fall 2011 Semester



Dear Students,

It is to inform you that due date of GDB # 01 has been extended because of holiday observed on Monday October 24, 2011.

Now, GDB will remain open till October 27, 2011 (11:59 PM).

Debt ratio = total debt / total assets

1. Debt ratio before taking loan
C/A = 15,468 C/L = 8,521
L & B = 179,589 long term debts = 96,895
Total assets = 195,057 Total Debts = 105416

Debt ratio = 105416 / 195057
Debt ratio = 0.54

2. Debt ratio after taking loan

C/A = 15,468 C/L = 8,521
L & B = 179,589 long term debts = 96,895
Loan = 253463 Loan = 253463

Total assets = 448520 Total Debts = 358879

Debt ratio = 358879 / 448520
Debt ratio = 0.8



3. As we know that the ratio greater than 0.66 to 1 is considered
alarming for the providers of funds. So, when company applies for loan
to financial institute or any fund providers company, they will verify
the company total debts & Assets value. After verification in Q#1, the
debts are lower than the 0.66; the company is in good condition for
investment.
Now if the company requested further loan to the financial institute,
they will not give them further loan, because the company debts are
greater than 0.66 which are 0.80.

JAZAKALLAH