CS Professional · Strategic Management and Corporate Finance · Strategic Analysis and Planning
Shree Textiles Ltd had sales of ₹200 crore last year. Its board sets an objective of 15% compound annual growth in sales for 2 years. What sales figure must it achieve at the end of year 2 to meet the objective?
Sales must reach ₹264.50 crore. Compounding 15% for two years on ₹200 crore gives 200 × 1.15 × 1.15, which is 264.50. Using simple growth of 30% would wrongly give ₹260 crore, ignoring growth on the first year's increase.
- A₹264.50 croreCorrect
- B₹260.00 crore
- C₹230.00 crore
- D₹300.00 crore
Explanation
Compound growth: 200 × 1.15 × 1.15 = 200 × 1.3225 = ₹264.50 crore. Check: year 1 = 230; year 2 = 230 × 1.15 = 264.50. The figure of ₹260 crore wrongly uses simple growth (30% over two years), and ₹230 crore covers only one year.
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