Calculate row for the given EBITDA margin.

Your doubt was in this particular question where we have to calculate row and for this we are given EBITDA margin of 40%. 40% is on sales, this EBITDA is given for 100 crores. Okay, after that, PAT is given as 10%, again, 10% on sales, book value is given, that is, book value is nothing but net worth and equity, 50 per share, total number of equity shares are of 100 crores, ah, if we are given ah total number of equity shares, then we can calculate the value of equity, so what can be the value of equity? 

So equity equal to book value that is book value per share into number of equity shares. So we will get the book value, the book value of the company is 51 0 crores, that is 50 per share 1 0 crores that is 500 crores which will be your book value or equity value, nothing but net worth of the company, okay, after that we are given EBITDA margin, so, we have to find out sales and from sales we will find out PAD, that is ah we will find out equity sorry profit, so if we divide profit by equity 100, then we will get the percentage of row, let us also write the full of ROE here once, so, the full of row is PAD or profit divided by equity we will put it into 100, that is for the answer in percentage, right now we have not got PAT but we have got equity, whatever values we have for PAT, we will put it, so here we will write sales, after that we will write EBIT and we will write PAT here, right now we don't have the value of sales but we have the EBITA percentage that is margin, so EBITA margin is 40 percent, so EBIT margin 40 percent means 40 here, so, your sales will come to 100 and if EBITA is 100 crores, then what will be the sales? 

X, that is cross multiplication and if we do this cross multiplication, then you will get sales, that is 100 140th, so, this will come to sales of 250 crores, right now we need PAT which is 10 percent of sales, 10 percent of sales, so this is nothing but 25 crores, that means 250 crores 10 percent, if we do it, then we will get 25 crores, can we substitute it now? 

So we will substitute it, here we will put PAT of 25 crores to substitute, we will take the equity of 500 crores which we have computed, we will multiply it by 100 and it will come to 5 percent, arrow, your second doubt was to calculate the inventory, where we are given current ratio of 2.5 and quick ratio of 1.5, we are given current assets of 1 lakh and we have to compute the inventory, so when we write current ratio, we write current assets divided by current liability and when it is given as 2.5, it means current assets are 2.5 and current liability is 1, that means when there is a current liability of 1 rupee, only then I have 2.5 current assets, now if I am given current assets of 1 lakh rupees, can I compute current liability? 

So yes 2.5 x equals 1 lakh that will give you 40 000 as current liability, now when we have not given any other addition that means if we have not given an addition of a bank overdraft in current liability, then the current liability will be your quick liability, so current liability equals to quick liability equals to 40 000 which we have computed, now we have got the quick liability, we also have the quick ratio, that means quick assets divided by quick liability that gives you 1, 5 to 1 which is given to you and here we got the quick liability which we had written as 40 000, can we compute the quick assets now? So yes for quick assets 1.54 000 equals x, that means x equals 1.54 000 quick assets will be of 60 000, now whenever we compute inventory that is current assets, whenever we take out quick assets, we will get inventory, otherwise in one way we can also say that quick assets are nothing but current assets minus inventory, now why do we have to find out the value of inventory from quick assets? 

Because inventory does not convert easily into cash, inventory for example raw material, I procure it as per my specifications or a company which is in manufacturing or trading procures it as per its specifications, if you try to convert it into cash, it may take some time and the easy way for a company to convert it into cash is to convert the inventory that means convert the raw material into finished product and you can recover money from it by selling it in cash, but yes in any particular case if the company closes down and you have to utilize the inventory, that is sell it off, then it becomes a little difficult because your inventory is made according to your specifications and this has to be taken out from quick assets, so even if you do current assets minus inventory, you will get it and if you bring the inventory to this side, then inventory equals to current assets minus quick assets, so this is simple mathematics, so inventory equals to current assets minus quick assets, here we have calculated the inventory, sorry current assets which we have been given of one lack, so we have written one lack here, we had computed quick assets as 60,000, so you will get the value of inventory as 40,000, this is very simple, this question only looks difficult, but this question is very easy, look at it once again and just write it down as I have written it, you will get the answer, thank you.