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CS Professional · Strategic Management and Corporate Finance · Introduction to Strategic Management

Kaveri Textiles Ltd had revenue of ₹200 crore last year. Its goal is to double revenue over five years, and its objective for year one is to grow revenue by 10% over last year. Its year-one objective is next year's revenue of ₹220 crore, then a further year-two objective of 10% growth on that. If the firm achieves only year-one and year-two objectives exactly, what revenue gap remains against the five-year goal at the end of year two?

The remaining gap is ₹158 crore. The goal is ₹400 crore, being double ₹200 crore. After two years of compounded 10% growth, revenue is ₹242 crore. Subtracting ₹242 crore from ₹400 crore leaves ₹158 crore still to be achieved.

  1. A₹158 croreCorrect
  2. B₹180 crore
  3. C₹242 crore
  4. D₹160 crore

Explanation

Goal: ₹400 crore (double of 200). Year one: 200 × 1.10 = 220. Year two: 220 × 1.10 = 242. Gap = 400 − 242 = ₹158 crore. Using 180 would wrongly subtract 220 only; 160 ignores compounding by using 20% simple growth (240).

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