A. There are two companies (X and Y) in the cement industry. Both are having same...

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A. There are two companies (X and Y) in the cement industry. Both are having same return on equity (ROE), i.e. 20%. These are some numbers regarding these companies: [5 Marks] ROE (%) Net Profit (INR) Total Sales (INR) Total Assets (INR) Equity (INR) Company X 20% 200000 2000000 Price-to-Earnings Ratio (Times) Price-to-Sales Ratio (Times) Earnings Growth (%) Price-to-Book Ratio (Times) Price-to-Cashflow Ratio (Times) 2000000 1000000 Mr. Ram wants to invest INR 1,00,000 in only one of these two companies, and he is a risk averse investor. You are supposed to use Du Pont Analysis and let Mr. Ram know which company is better for investment purpose and what is your rationale for such investment? 5 Company Y 20% B. Mr. Shyam is planning to invest in the Indian IT sector, and he has identified two quality companies (P and Q) in the sector. Both companies are having similar characteristics in terms of profitability, liquidity, efficiency, and leverage ratios. However, some differences are there with respect to the valuation ratios. These are some valuation ratios regarding these companies: [5 Marks] Company P 15 10 3.1 300000 1500000 5 7500000 1500000 Company Q 18 5.1 25% 3 2.5 You are supposed to comment on each of the ratios mentioned above, and let Mr. Shyam know which company is better for investment purpose and what is your rationale for such investment? A. There are two companies (X and Y) in the cement industry. Both are having same return on equity (ROE), i.e. 20%. These are some numbers regarding these companies: [5 Marks] ROE (%) Net Profit (INR) Total Sales (INR) Total Assets (INR) Equity (INR) Company X 20% 200000 2000000 Price-to-Earnings Ratio (Times) Price-to-Sales Ratio (Times) Earnings Growth (%) Price-to-Book Ratio (Times) Price-to-Cashflow Ratio (Times) 2000000 1000000 Mr. Ram wants to invest INR 1,00,000 in only one of these two companies, and he is a risk averse investor. You are supposed to use Du Pont Analysis and let Mr. Ram know which company is better for investment purpose and what is your rationale for such investment? 5 Company Y 20% B. Mr. Shyam is planning to invest in the Indian IT sector, and he has identified two quality companies (P and Q) in the sector. Both companies are having similar characteristics in terms of profitability, liquidity, efficiency, and leverage ratios. However, some differences are there with respect to the valuation ratios. These are some valuation ratios regarding these companies: [5 Marks] Company P 15 10 3.1 300000 1500000 5 7500000 1500000 Company Q 18 5.1 25% 3 2.5 You are supposed to comment on each of the ratios mentioned above, and let Mr. Shyam know which company is better for investment purpose and what is your rationale for such investment?

Answer rating: 100% (QA)

A Du Pont analysis is a financial tool that is used to assess a companys ability to generate shareholder value Based on the information provided we ca... View the full answer