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Business Data Management · Quiz 2 · 16 Aug 2026 · May 2026 term

Question 24: Inspired by successful industry peers, the CEO initiates…

Question 24

+3 marksOne correct option

Directions: Read the following simplified financial data for X Robotics Ltd. carefully and answer the given subquestions. Show your mathematical reasoning. All formulas and concepts required are based strictly on the provided financial analysis case study framework.
Company Overview & Financial Data (Figures in Millions of Rupees):
X Robotics Ltd. is an industrial automation manufacturer. Below is a snapshot of their simplified financial position for the fiscal year ending March 31, 2025 (FY 2025), along with select figures from FY 2024.
Simplified Profit & Loss Statement Data (FY 2025):
● Revenue from Operations: ₹500 ● Cost of Materials and Services: ₹300 ● Employee Benefits & Other Expenses: ₹100 ● Depreciation: ₹20 ● Finance Costs (Interest): ₹10 ● Tax Rate: 30% flat on Profit Before Tax (PBT) ● (Note: For FY 2024, Revenue from Operations was ₹400).
Simplified Balance Sheet Data (As of March 31, 2025):
● Total Assets: ₹400 ● Shareholder's Equity (Net Worth): ₹200 ● Total Debt (Borrowings): ₹100 (Note: The company pays a flat 10% interest rate on its debt) ● Average Inventory: ₹60 ● Average Debtors (Trade Receivables): ₹50
Market Data:
● Shares Outstanding: 10 million shares ● Market Price per Share: ₹73.50 ● Total Dividends Paid: ₹24.5 million

Inspired by successful industry peers, the CEO initiates a strict working capital optimization program. By enforcing strict collection efforts and lean supply, they successfully reduce Average Debtors by 20% and Average Inventory by 20%, without affecting Revenue, COGS, or Net Profit. The company takes all the cash freed up from these reductions and immediately uses it to repay Total Debt. What is the company's new Debt-Equity Ratio, and what is its new Return on Assets (ROA)?

  1. A

    New Debt-Equity Ratio: 0.50x, New ROA: 12.25%

  2. B

    New Debt-Equity Ratio: 0.39x, New ROA: 12.25%

  3. C

    New Debt-Equity Ratio: 0.45x, New ROA: 13.50%

  4. D

    New Debt-Equity Ratio: 0.39x, New ROA: 12.96%

Show answer

Correct answer

  • D

    New Debt-Equity Ratio: 0.39x, New ROA: 12.96%

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Question 24 of 24 in the IIT Madras BS Business Data Management (BDM) Quiz 2 paper sat on 16 Aug 2026, in the May 2026 term (Business Data Management 14 Aug 26). It carries 3 marks.

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