Fundamental Analysis for Investors by Raghu Palat

Author:Raghu Palat [Palat, Raghu]
Language: eng
Format: epub
ISBN: 9788170949428
Publisher: Vision Books
Published: 2016-05-20T00:00:00+00:00

Vasanth Ltd.

Balance Sheet as at 31 March 2010

(In Rupees Lakh)

Shareholders’ funds 100 Fixed Assets 70

Loan funds 200 Investments 30

Current liabilities 20 Current Assets 220

320 320

Current assets include cash of Rs. 100 lakh to repay the loan. Vasanth Ltd. did repay the loans, as promised on 1 April 2010. Its Balance Sheet after the repayment read:

Vasanth Ltd.

Balance Sheet as at 1 April 2010

(In Rupees Lakh)

Shareholders' funds 100 Fixed Assets 70

Loan funds ------ Investments 30

Current liabilities 20 Current Assets 20

120 120

An investor reviewing the Balance Sheets would be forgiven for drawing two very different conclusions. At 31 March 2010, Vasanth Limited would be considered a highly leveraged company, one financed by borrowings. On 1 April 2010, on the other hand, it would be concluded that the company was very conservative and undercapitalized, as a consequence of which its growth would be limited.

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