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Bengal aluminium company case
1. Bengal AluminIum Company Case Depreciation Presented by: Anvesh Lanka Fenella Andrade MalleshGoudar Nipun Jain Masters in European Studies and Management (MESM) 2010-2012 Manipal Centre for European Studies Manipal University, Karnataka, India
2. Question 1 Accounting for Decrease in Depreciation Expense Profit After Tax = 2,570,000,000 - 141,586,327 = 2,428,413,673 Accounting for the effect of ‘Depreciation Written Back’ Profit After Tax = 2,428,413,673 – 782,312,370 = 1,646,101,303 All details in Rupees INR
3. Question 2 Bengal Aluminium Company 2005 10.61% 2006 10.42% 2007 10.26% 2008 12.44% [Including change in depreciation valuation] 11.75% [Without change in depreciation valuation] National Aluminium Company 2005 9.19% 2006 10.78% 2007 18.86% 2008 15.10%
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5. Question 5 Based on the percentages from Question 2, it is clear that BAC has been lagging behind NAC in terms of net profit margin, specially after it installed the new smelter However, one would have to consider that those figures may not be truly representative of the actual situation and could just be bloated figures Based on our estimation the actual profit/sales percentage would be closer to 7.9 than the calculated value Since it has been mentioned that the other aluminium firms practice similar accounting practices, one could assume that the figures for these other companies could also just be bloated figures Caution is advised in investing in such firms. A clearer understanding of these companies’ account books would be mandatory
