Table of Contents

Solution 1. 3

Solution 2. 4

Solution 3. 5

        A.) History of Naryana Hrudayalaya. 5

1. B) Business/products of the company. 6
2. C) Management/Board of Directors. 6
3. D) Financial Statements. 6
4. E) Director’s report 7
5. F) Management Discussion and Analysis. 7
6. G) Stock market information. 8
7. H) Peer/Competitors data. 8
8. I) Quarterly results. 9
9. J) Balance sheet and the income statement for the current year. 9

Solution 4: Ratio analysis. 9

Solution 5: Marginal costing. 15

Solution 6: Budgets and Budgetary control 23

 Solution 1

1. A) The ‘What if’ analysis tool is identified as the managerial term that is basically used in the management and cost accounting. Under this analysis, the managers make necessary changes in the amount and the volume to analyze their impact and effect if these are actually changed in future period of time. This specific analysis technique is also referred to as the sensitivity analysis. For example, what if analysis would be applied when the management plans to increase the sales price of products by $3 per unit and can observe what will happen when prices are actually increased.
2. B) The balance score card is identified as the performance metric that is basically used for attainment of strategic management within the organization through four key perspectives, i.e. customers, financial, learning and growth and internal process.

Financial: The perspective shows that how the shareholders can be managed for gaining long term success (Boscia and McAfee, 2014, January). This perspective helps business to solve their financial problems through a focused approach and thus company can improve long term sustainability. An example could be by enhancing profitability and revenue the business would be able to solve its problems.

Customer: The outlook focuses over how the organization would be perceived by the customers for attainment of objective and vision for gaining necessary trust and confidence of customers. An example could be through effective marketing of high quality products for enhancing customers’ satisfaction.

Internal process: The perspective explains what essential business processes are required for gaining excellence in the organization and how these processes can be effectively implied within the organization. An example could be the constant innovation and quality control would help in attaining trust and relevant publicity within the marketing through the different business processes (Grigoroudis, et. al., 2012).

Learning and growth: The outlook shows how the manager would be able to improve and change its current practices and procedures for gaining necessary sustainability within the organization for future success. The example for this could be taken as through establishment of standardized training procedures and quality building among employees.

Solution 2

The budgeting is identified as the process in which budgets are prepared by the organizations that aims at determination of expected expenses and revenue in respect of different activities and operations of the business for a future period (Bogsnes, 2016). Thus, budgeting process mainly emphasizes over preparation of detailed financial statements and results that helps in the future projection of income and expenses for a specific time period in future. A number of budgets are prepared by organizations like Unilever which are as follows:

Master budget: The Unilever Company prepares this budget which is basically a combination of several individual budgets that helps in providing an overall picture regarding the health and financial activities of business. For example, sales budget, production budget, overhead budget etc.

Cash budget: The Unilever organization by preparing this budget aims at future projection of inflow and outflow of cash within the business in a particular time period (Roncalli, 2013). This helps the organization in proper management of cash for distinct activities.

 Operating budget: The Unilever Company, with the help of this budget, is able to effectively forecast and analyze the future expenses and losses over the course of operations for a particular time period (Wildavsky, 2017). Thus, the budgets provide accurate prediction regarding, manufacturing expenses, sales, labor, overhead and material cost along with administrative cost etc.

Static budget: This is the fixed budget prepared by Unilever and does not consider changes that occur in the income as well as the sales volume (Cools, et. al., 2017). The budget is mainly used for proper storage and warehousing of products irrespective of change in inventory level due to entering and leaving of inventory from the godown.

Financial budget: This is the budget that is prepared by the Unilever for effective and proper management of future expenses, cash flow, income and assets of the business (Roncalli, 2013). The budget provides a comprehensive picture regarding financial health and the expenditure with respect to key operations of the business.

Sales budget: This budget helps in proper forecasting of total sales for a specific period and is shown in either through quantity or money terms. The budget is important because all other budgets are prepared on the sales budget.

Production budget: The budget helps in forecasting the output that will be produced during a specific period and is helpful in scheduling the production as per the sales budget.

Solution 3

A.) History of Naryana Hrudayalaya

The healthcare institution is identified as the chain of major multispecialty hospitals in India that is founded by Dr. Devi Prasad Shetty in the year 2000. The hospital is currently having its headquarters located at Bengaluru in India with strong presence in states like Karnataka and other southern states of India (Naryana Hrudayalaya, 2018). The hospital was initially started as a hospital with 225 bed capacity and provided services in heart care and other primary facilities. There is also an international hospital at the in the Cayman Islands.

B) Business/products of the company

The hospital provides advanced healthcare services in more than 30 specialties. The major business products can be identified in the form of services in specialties such as Cancer care, Gastroenterology, Cadiac surgery, Neurology, Cardiology, Neurosurgery, Urology, Orthopedics and Nephrology.

C) Management/Board of Directors

Position	Key person
Chairman and CEO	Dr. Devi Prasad Shetty
Vice Chairman	Dr. Ashutosh Raguvanshi
Executive Director	Viren Shetty
Non-Executive Director	Kiran Mazumdar Shaw
Board of Directors (Independent Director)	Dinesh Krishna Swamy
	Muthuraman Balasubramanian
	Arun Seth
	B N Subramanya
	Manohar D Chatlani

D) Financial Statements

For the year ending 31 March 2018, the revenue from operations for the organization is Rs. 22,809.07 million while it is Rs 18781.65million in the year 2017. The total income has been Rs 22998.07 million for the year 2018 while it is Rs18956.47in the year 2017 (Naryana Hrudayalaya, 2018). The profit for the year is Rs 514.02million while it is Rs 829.74 million in the year 2017. The income tax expenses have reduced to Rs 289.64million in the current year from 523.66in 2017.

E) Director’s report

The director’s report provides detailed information with respect to the financial and operational performance of the organization. The report enables the shareholders to gain information regarding the related party transactions, non-compliance regarding the capital markets, the whistleblower policy (Naryana Hrudayalaya, 2018). Further, the report also states that the financial statements of the company have materially true and significant and does not hide any material fact that can be misleading. The report also makes sure that the financial statements are prepared in compliance with the relevant accounting standards, laws and regulations.

Performance review of consolidated operations

The directors have commented that in the year under review, the total revenue of the organization has raised to Rs 22998.07mn in the year 2017-18 from Rs 18956.47mn in 2016-17. The earnings before interest, tax, amortization and depreciation and the exceptional items has reduced to Rs 2311.65mn in 2017-18 from Rs 2463.38mn in 2016-17.

Along with the authorized share capital of the company as on 31 March 2018 is Rs 3800mn that is made up of 71000000 preferences shares of Rs 10 each and 309000000 equity shares of Rs 10 each. The directors have also commented that a suitable risk management policy has been formulated with the help of Audi, risk and compliance committee. The directors have also proposed for the insider trading policy.

F) Management Discussion and Analysis

The organization aims for maintaining the superior quality standard for clinical excellence, satisfaction and the patient health care. With respect to the governance and accountability, the organization aims for developing an environment that is responsible and transparent so that the highest corporate standards and trust can be achieved with the customers. The organization has also adopted an appropriate Dividend Declaration Policy so that proper dividend can be provided to employees.

G) Stock market information

(Source: Yahoo finance, 2018)

The above chart show the five year comparative stock chart of Naryana Hrudayalaya and it can be observed that there is continuously decline over a period of five years in the stock prices of the company. Thus, the organization is required to adopt necessary policies for maintaining its stock prices.

H) Peer/Competitors data

The major competitors of the organization have been identified as Apollo Hospitals, Manipal Hospitals and the Fortis healthcare. The Apollo hospitals are earning revenue of $1.1billion while the Manipal Hospitals are earning revenue of $196million. In case of Fortis, it generates revenue of $628.2million as compared to other major hospital chains of India.

I) Quarterly results

The third quarter results of the company showed the total operating revenue as INR 7321 million while the total expenses were INR 6542 million. The profit after tax for the current quarter was INR 127 million (Naryana Hrudayalaya, 2018). In case of balance sheet, the long term debt showed INR 8174 million in the long term debt for the third quarter while it is INR 51 million for short term debt. The shareholder equity is INR 10568 million in the current quarter.

J) Balance sheet and the income statement for the current year

In the current year, the current assets of the company have increased to Rs 4792 million in 2018 and the non-current assets have increased to 20563.02 million. The total assets have increased to Rs 25355.95 million in the current year. The current liabilities of the company have increased to 5097.66 million in the current period and the noncurrent liabilities have increased to Rs 9897.91million in the present period (Naryana Hrudayalaya, 2018). In case of income statement, the profit before tax has reduced to Rs 803.66 in the current period. This may be due to increase in the expenses which have raised to Rs 22153.47 million in the current year.

 

 

 

Comment: As per the management views and analysis, the detailed discussion has been made regarding the financial and the operating performance of the organization and the organizations has taken relevant steps for improving the current condition of the company through the distinct function areas. Thus, it is recommended that the new investor can invest in the company for gaining relevant profits and further, in case of the existing investors the organization is making constant improvements in the operations which enhance the long term profitability of the company.

Solution 4: Ratio analysis

Problem 1	Company A	Company B
Current assets	500	800
Current liabilities	200	300
Current ratio = current assets/Current liabilities	2.5	2.67
profit after tax	800	720
Reserves & Surplus	2200	1900
Equity share capital	500	400
Shareholder's equity	2700	2300
Return on equity= Net income/Shareholder's equity	0.30	0.31
Net Sales	4500	4400
Fixed Assets	900	1000
Turnover to fixed asset= Net sales /fixed asset	5	4.4
Current liabilities	200	300
Non current liabilities (Term loan)	200	500
Shareholders' fund	2700	2300
Debt equity ratio= Total debt/Shareholders' equity	0.07	0.22
Profit after tax	800	720
No. of Equity shares	500	400
EPS= Profit after tax/Total number of equity shares	1.6	1.8
Dividend per share	1	1.1
Earnings per share	1.6	1.8
Dividend payout ratio= DPS/EPS *100	62.5	61.1
Equity	500	400
Reserves and surplus	2200	1900
Profit after tax	800	720
Book value per share	3.8	3.95
Market price share	15	16.5
price to book value	3.95	4.18
Market price per share	15	16.5
Earnings per share	1.6	1.8
Price to earnings ratio= MPS/EPS	9.38	9.17

 

Problem 2
Current assets	30
Current liabilities	10
Current ratio	3
Total debts	50
Shareholder's equity	170
Debt equity ratio	0.29
Net Sales	630
Fixed Assets	90
Turnover to fixed assets	7
Profit after tax	60
Shareholders' equity	170
Return on equity	35%
Total assets	220
Current liabilities	10
Capital employed	210
profit before tax	90
Return on capital employed= Profit before tax/capital employed	43%
Profit after tax	60
Number of equity shares	10
EPS	6
Operating profit	60
Net Sales	630
Operating profit ratio	10%
MPS	7.2
EPS	6
price to earnings ratio	1.2

 

Problem 3
Net Sales	3600000
Total assets	1200000
Fixed assets	720000
Current assets	480000
Inventory	180000
Debtors	240000
Current liabilities	240000
Net Worth	480000
Long term debt (loans)	480000
Cash	60000

 

Balance sheet
Liabilities	Amount	Assets	Amount
Net Worth	480000	Fixed assets	720000
Long term loans	480000	Stock	180000
Current liabilities	240000	Debtors	240000
		Cash	60000
Total	1200000	Total	1200000

 

Problem 4
Profit and loss account
For the year ended 2016-17
Particulars	Amount	Particulars	Amount
Cost of Sales	37057	Net revenue	59289
Gross profit c/d	22232
Selling and marketing expenses	2728	By Gross profit b/d	22232
General and Adm. exp.	3628
Total operating expenses	6356
Operating profit	15876
		By Operating profit	15876
		Other income	3062
Net profit before tax	18938	By Net profit before tax	18938
Tax expenses	5120
Net profit after tax	13818

 

Question 6:
Operational performance ratio
Operating performance ratio: Net sales / net property plants and the equipment
Operating performance ratio:
	17-18	16-17
net sales	2019.75	1649.05
Net property plants and the equipment	1360.08	1399.37
Operating performance ratio	1.49	1.18
performance ratio of the company is improving as compared to that of the last year.

 

Liquidity and the profitability ratio:
Current ratio: Current assets / Current liablities
	2018	2017
Current assets	596.27	508.63
Current liablities	2757.12	2271.42
current ratio-	0.22	0.22

 

Quick ratio: Liquid assets/ Current liabilities
	2018	2017
Current assets	596.27	508.63
Inventories	299.91	296.62
Liquid assets	296.36	212.01
Current liabilities	2757.12	2271.42
Quick ratio	0.11	0.09

Liquidity position of the company is same as compared to that of the last year, but company need to make the improvement in the generating the liquid assets in the company.

 

Profitability ratios:
Gross margin ratio: gross profits/ net sales*100
	2018	2017
Gross profit	719.71	564.56
net sales	2019.75	1649.05
gross profit ratio	35.63	34.24
Operating margin ratio:  operating profit / net sales*100
	2018	2017
operating profits	214.4	-145.24
net sales	2019.75	1649.05
operating profit ratio	0.11	-0.09

 

Performance of the company is improving as compared to that of the last year.

 

Captital structure ratio:
Debt to equity ratio: Debt / Equity
	2018	2017
Debt	412.53	990.43
Equity	1800.56	1615.43
debt equity ratio	0.23	0.61
Asset coverage ratio: (Total asset - Intangible assets) - (Current liablities -  short term debts)/Total debts
	2018	2017
Total assets	4970.21	4877.28
Intangible asset	0	0
Net assets	4970.21	4877.28
Current liablities	2757.12	2271.42
Short term debts	1682.75	1437.41
Current liablities - Short term debts	1074.37	834.01
Total debts	3169.65	3261.85
Asset coverage ratio	1.23	1.24

 

Performance of the company is improving in terms of the capital structure, the company is operating on the own funds but is generating the less revenue from the assets employed in the company as compared to that of the last year.

 

Solution 5: Marginal costing

Problem 1
Fixed Cost	250000
Variable cost	750000
sales	1125000
Output (units)	75000
Contribution	375000
Profit earned during the year	125000

 

Problem 2
Sales	100000
Variable cost	70000
Contribution	30000
P/V ratio	30%
Profit	10000
Fixed cost	20000
Sales Volume to earn a profit of 40000	2

 

Problem 3
Direct material	5
Direct labor	2
Direct overhead	2
Variable cost per unit	9
Fixed cost	90000
Selling price per unit	12
Contribution per unit	3
P/V ratio	25%
Break Even Sales (in units)	30000
Break Even Sales (in RO)	360000
Sales for earning a profit of 450000	2160000

 

Problem 4
Change in Profits	200000
Change in Sales	1000000
P/V ratio	20%
Fixed Cost for the period 1	200000
Sales required to earn profit of 500000	3500000
Profit when sales are 1000000	500000

 

Problem 5
Change in profits	8000
Change in sales	20000
P/V ratio	40%
Fixed cost for the period 1	25000
BEP	62500
Profit for estimated sales of 125000	25000
Sales for earning a profit of20000	112500

 

Problem 6:
Sales	2000000
Variable cost	1200000
Contribution	800000
Contribution per unit	8
fixed cost	400000
BEP in units	50000

 

Problem 7
Change in profits	4000
Change in sales	20000
a.) PV ratio	20%
sales in 2015	220000
Fixed cost	30000
b.) Break even point	150000
desired Profit	18000
Fixed cost	30000
contribution	48000
PV ratio	20%
c.) sales in RO	168000

 

Problem 8:
Particulars		current capacity 70%		offer units
Total capacity		19000		5000
Utilization capacity		13300
Ideal capacity		5700
Sales price per unit	21	21		15
Sales in value		279300		75000
Less variable cost	11.8	156940		59000
contribution	9.2	122360		16000
less: Fixed cost		79800		0
Profits		42560		16000
a) Offer of 1000 units should be accepted instead of 5000 units
b) For making the production of the 10000 units company have to make the sacrifice of the 4300 units from the current production units and have to sacrifice the contribution of RO 9.2 per unit for earning the contribution of RO 3.2 per unit. And the company will also incurred the additional fixed cost for making the production of the 10000 units as this production of 10000 units exceeds the idle production capacity of the company which is 5700 units @ 6=25800
c) Company should accept the proposal to buy the 5000 units @15 from the local buyer because in this case also the company will not be incurring any of the additional fixed cost and the contribution earned by the company is the profit earned by the company.
d)If the buyer of the products of the company is government then the minimum cost that can be quoted to the government will be equal to that of the variable cost of production of the company.   Problem 9: Alternative a: Particulars a B units 500 500 Selling price 50 40 Sales price 25000 20000 less: Direct material 8000 6000 less direct wages 6000 4000 variable overhead 9000 6000 Total variable overhead cost 23000 16000 contribution 2000 4000 Fixed cost 1500 1500 Profits 500 2500 Total profits 3000

 

Alternative B:
Particulars	B
Units	800
Sales price	40
Sales value	32000
less: Direct material	9600
Less: direct wages	6400
less: Variable overhead	9600
total variable cost	25600
Contribution	6400
fixed cost	1500
profits	4900

 

Alternative c:
Particulars	A	B
Units	800	200
Selling price	50	40
Sales value	40000	8000
Direct cost	12800	2400
Direct wages	9600	1600
Variable overhead	14400	2400
Total variable cost	36800	6400
Contribution	3200	1600
Fixed overhead	1500	1500
Profits	1700	100
Total profits	1800

 

Alternative D
Particulars	A	B
Units	300	700
selling price	50	40
Sales value	15000	28000
Direct cost	4800	8400
Direct wages	3600	5600
Variable overhead	5400	8400
total variable cost	13800	22400
Contribution	1200	5600
Fixed overhead	1500	1500
Profits	-300	4100
Total profit	3800
Decision	Alternative B should be selected

 

Problem 10:
	Present performance	Selling price redued by 10%	Selling price to be reduced by 20%
Unit	100000	111111
selling price	200	180	160
sales value	20000000	20000000
cost:
Material	60	60	60
wages	20	20	20
variable overhead	20	20	20
total cost	100	100	100
contribution	100	80	60
Fixed cost	50
Profits	50
	If the selling price is to be reduced by 10%	If selling price to be reduced by 20%
sales in value
Fixed cost	5000000	5000000
Desired profit	5000000	5000000
Existing sales price	200	200
Contribution per unit:
selling price	180	160
less: total variable cost	100	100
Contribution per unit	80	60
Sales in units	125000	166666.67

 

Problem 11:
Part A.
Calculation of the break even point in units and the value
Total fixed cost	36000
selling price	3
total vatiable cost	2.1
Contribution per unit	0.9
Break even point in units	fixed cost / contribution per unit
BEP (Units)	40000
PV Ratio	0.3
BEP In value	120000
Units sold	35000
Selling price	3
sales value	105000
Less: Variable cost	73500
Contribution	31500
Less: Fixed cost	36000
Loss	-4500
Part b:
selling price	3
variable cost	1.95
Contribution per unit	1.05
Fixed cost	27000
Break even points in unit	25714

 

Problem 12
particulars	present performance	proposal 10000 units
present operating capacity	50%
idle capacity	50%
sales	40000	10000
sales in value	560000	130000
selling price per unit	14	13
less; Direct material	160000	40000
Direct labor	80000	20000
Variable overhead	240000	60000
total variable cost	480000	120000
Contribution	80000	10000
less fixed cost	160000	0
Loss	-80000	10000

 

Decision: Company should accept the offer because if the company accepts the offer then the total loss of the company will get reduced by the profit of RO 10000 incurred on acceptance of offer.

 Solution 6: Budgets and Budgetary control

Problem 1:
Particular	August	September	October	November	December
Sales	50000	52000	66000	60000	70000
Material	32400	30000	36000	30000	38000
wages	7600	7600	8000	8400	9000
Overheads	3800	4200	4600	4800	5000
Cash Budget
Particular	August	September	October	November	December
Opening balance			8000	16800	34200
collection from the debtor		50000	52000	66000	60000
total receivable			60000	82800	94200
payment:
Advance tax		5000			5000
Payment to creditor 10%	3240	3000	3600	3000	3800
Payment to creditor 90%		29160	27000	32400	27000
wages	7600	7600	8000	8400	9000
overheads	3800	4200	4600	4800	5000
Total payment			43200	48600	44800
Closing balance			16800	34200	49400

 

Problem 2:
Particular	August	September	October	November	December
Sales	140000	172000	176000	150000	160000
Material	120000	120000	119600	120000	121000
wages	17600	17600	18000	18400	19000
Overheads	13800	14200	14600	14800	15000
Cash Budget
Particular	August	September	October	November	December
Opening balance		58000	12000	34240	20000
Collection fron debtor 50%	70000	86000	88000	75000	80000
Collection fron debtor 50%		70000	86000	88000	75000
Total receipt	70000	214000	186000	197240	175000
payments:
Advance tax		15000			15000
Payment to creditors 10%	12000	12000	11960	12000	12100
Payment to creditor 90%		108000	108000	107640	108000
wages		17600	17600	18000	18400
Overheads		13800	14200	14600	14800
Purchase of the machinery				25000	25000
Total payment	12000	166400	151760	177240	193300
Closing balance	58000	47600	34240	20000	-18300

 

Problem 3:
particulars	June	july	august	september
cash sales	120000	140000	152000	121000
Credit sales	100000	80000	140000	120000
Purchase	160000	170000	240000	180000
Other expenses	18000	20000	22000	21000
Wages	21000	22000	23000	24000
Cash budget
Particulars	June	July	August	September
opening cah balance		22000	37000	53500
receipts:
Cash sales	120000	140000	152000	121000
50% of the credit sales	45000	36000	63000	54000
50% of the credit sales		47500	38000	66500
Total receipt	165000	245500	290000	295000
Payments:
Purchase 25%	40000	42500	60000	45000
purchase 75%		120000	127500	180000
Wages		21000	22000	23000
Other expenses	18000	20000	22000	21000
Interest payable	5000	5000	5000	5000
Total payment	63000	208500	236500	274000
Closing balance	102000	37000	53500	21000

 

Problem 4:
Particulars	February	March	April	May	June
sales	60000	62000	64000	58000	56000
Material	36000	38000	33000	35000	39000
Wages	9000	8000	10000	8500	9500
Overheads	4000	4200	4600	4800	4000
Cash Budgets
Particulars	February	March	April	May	June
Opening balance			5000	20500	39150
Receipt:
cash sales	6000	6200	6400	5800	5600
50% of the credit sales	27000	27900	28800	26100	25200
50% of the credit sales		27000	27900	28800	26100
Total receipts	33000	61100	68100	81200	96050
Payments:
Payment to creditor		36000	38000	33000	35000
Advance tax					8000
Overheads	4000	4200	4600	4800	4000
Wages	4500	4000	5000	4250	4750
Total payment	8500		47600	42050	51750
Closing balance			20500	39150	44300

References

Bogsnes, B., 2016. Implementing beyond budgeting: Unlocking the performance potential. John Wiley & Sons.

Boscia, M.W. and McAfee, R.B., 2014, January. Using the balance scorecard approach: A group exercise. In Developments in Business Simulation and Experiential Learning: Proceedings of the Annual ABSEL conference (Vol. 35).

Cools, M., Stouthuysen, K. and Van den Abbeele, A., 2017. Management control for stimulating different types of creativity: The role of budgets. Journal of Management Accounting Research, 29(3), pp.1-21.

Grigoroudis, E., Orfanoudaki, E. and Zopounidis, C., 2012. Strategic performance measurement in a healthcare organisation: A multiple criteria approach based on balanced scorecard. Omega, 40(1), pp.104-119.

Naryana Hrudayalaya, 2018.Annual report. [Online] https://www.narayanahealth.org/sites/default/files/download/annual-reports/NHL_Annual_Report_2017-18.pdf [Accessed 5 March 2019].

Roncalli, T., 2013. Introduction to risk parity and budgeting. CRC Press.

Wildavsky, A., 2017. Budgeting and governing. Routledge.

Winston, W., 2016. Microsoft Excel data analysis and business modeling. Microsoft press.

Yahoo Finance, 2018. Stock Chart. [Online] [Accessed 5 March 2019