Company ARs in Crore Standalone Balance Sheet as of 31st March, 2019 Standalone Profit & Loss account for the period ended 31st March, 2019 Revenue from Operations [Gross] 37,660 Sources of Funds Less: Excise/Service Tax/Other Levies 0 Total Share Capital 216 Revenue from Operations [Net] 37,660 Equity Share Capital 216 Other Operating Revenues 564 Share Application Money 25 Total Operating Revenues 38,224 Reserves 7,418 Other Income 664 Net Worth 7,659 Total Revenue 38,888 Total Liabilities 7,659 EXPENSES Cost of Materials Consumed 13,240 Application of Funds Purchase of Stock-In Trade 4,708 Gross Block 5,912 Changes in Inventories Of FG,WIP And Stock-In Trade 12 Less: Revaluation Reserves 0 Employee Benefit Expenses 1,747 Les

Answer the following questions based on the table provided in the MS Excel file and provide a detailed analysis based on the above statement provided for Company A:

1. Using the Dupont formula for Company A, Return on Equity (ROE) is 78.80%

*The formula used for ROE=Profit Margin*Asset Turnover*Equity Multiplier

ROE = 15.52%*2.18*2.33

ROE = 78.80%

Using the above formula, explain how working capital policy of a large textile Company A would affect the expected ROE.

Answer rating: 100% (QA)

Introduction Company As financial performance can be analyzed using the DuPont formula which decomposes the Return on Equity ROE into three components Profit Margin Asset Turnover and Equity Multiplie... View the full answer