FIN622 GDB Solution

FIN622 GDB Solution

The given table portrays the financial data for the two i.e. Firms A and Firm B. The difference between the two firms is their policy or approach (conservative or aggressive) towards current assets management.
Items Firm A Firm B Sales Rs. 5,000,000 Rs. 5,000,000 Current Assets 300,000 600,000 Fixed Assets 900,000 900,000 Net Income 300,000 300,000
Required: Using the above given data, [list=1]
[*]Identify the firm using the conservative policy (Firm A OR Firm B)
[*]Identify the firm using aggressive policy (Firm A OR Firm B)
[*]What will be the value of “return on assets” for firm using conservative policy.
[*]What will be the value of “return on assets” for firm using aggressive policy.
Note: Working or calculations are not required for this particular GDB. Just provide your answer (Resulting Figures) according to requirement of question.
Your answer should simply look like this:

1. Identify the firm using the conservative policy xxxxx
2. Identify the firm using aggressive policy xxxxx 3. What will be the value of “Return on Asset” for firm using conservative policy xxxxx 4. What will be the value of “Return on Asset” for firm using aggressive policy xxxxx

Idea Solution:-

1) Identify the firm using the conservative policy (Firm A OR Firm B
Answer: ) Firm B
2) Identify the firm using aggressive policy (Firm A OR Firm B)
Answer: Firm A
3) What will be the value of “return on assets” for firm using conservative policy.
Answer: 0.20
4) What will be the value of “return on assets” for firm using aggressive policy.
Answer: 0.25

As Return on Assets = Net Income / Total Assets

So working is only 4 conformations
WORKING
Firm A using aggressive policy
Return on Assets = Net Income total Asset.
Return on Assets = 300000 / 1200000
Return on Assets = 0.25
Return on Assets = 25%
Firm B using the conservative policy
Return on Assets = Net Income total Asset.
Return on Assets = 300000 / 1500000
Return on Assets = 0.20
Return on Assets = 20%