Question

You have been provided with the following summarized accounts of Golden Times Ltd. For the year ended 31 March 2000:

Answer 1

The computation of the following financial ratios for Golden Times Ltd is as follows:

(i) Return on capital employed:

= Profit after tax/Total assets - current liabilities x 100

= 12.44% (Sh 224,000/ Sh 1,800,000) x 100

(ii) The profit margin:

= Profit after tax/Sales revenue x 100

= 5.6% (Sh 224,000/Sh 4,000,000 x 100)

(iii) The turnover of capital:

= Sales Revenue/Equity

= 2.86 x (Sh 4,000,000/Sh 1,400,000

(iv) Current ratio:

= Current Assets/Current Liabilities

= 1.09 (Sh 1,520,000/Sh 1,400,000)

(v) Liquid ratio:

= Current Assets less Stocks /Current Liabilities

= 0.37 (Sh 1,520,000 - Sh 1,000,000/Sh 1,400,000)

(vi) Number of days accounts receivable are outstanding:

= Average Accounts Receivable/Sales Revenue x 365

= (Sh. 400,000/Sh. 4,000,000 x 365

= 36.5 days

(vii) Proprietary ratio:

= Shareholders equity/Total assets x 100

= 43.75% (Sh. 1,400,000/Sh. 3,200,000)

(viii) Stock turnover ratio:

= Cost of goods sold / Average stock

= 2.11 x (Sh. 3,000,000/Sh. 1,420,000)

(ix) Dividend yield ratio:

= Dividend per share/Price per share

= 5.36% (Sh. 0.268/Sh.5 x 100)

(x) Price earnings ratio:

= Market price per share/Earnings per share

= 8.93x (Sh. 5/Sh. 0.56)

Data and Calculations:

Golden Times Ltd

Balance sheet

As at 31 March 2000

                                                              Sh.               Sh.                  Sh.

Fixed Assets:

Freehold property (Net Book Value)                                          480,000

Plant and machinery (Net Book Value)                                      800,000

Motor Vehicle (Net Book Value)                                                 200,000

Furniture and fittings (Net Book Value)                                     200,000

                                                                                                  1,680,000

Current Assets:

Stocks                                                                1,000,000

Debtors                                                                400,000

Investments                                                          120,000

                                                                          1,520,000

Current Liabilities:

Trade creditors                            338,400

Bank overdraft                            878,400

Corporation tax                           176,000

Dividends payable                      107,200      1,400,000         120,000

                                                                                               1,800,000

Financed by:

Authorized share capital – 800,000

Sh. 1 ordinary shares

Issued and fully paid: 400,000 Sh.1                                      400,000

Ordinary shares

Capital reserve                                                                      200,000

Revenue reserve                                                                   800,000

Loan capital: 400,000 10% Sh. 1 Debentures                     400,000

                                                                                            1,800,000

Golden Times Ltd

Profit and loss account

For the year ended 31 March 2000

                                                                                          Sh.

Sales (credit)                                                                 4,000,000

Profit after charging all expenses except interest on  440,000

debentures

Less: Debenture interest                                                (40,000)

Profit before tax                                                             400,000

Corporation tax                                                               176,000

Profit after tax                                                                224,000

Less: Ordinary dividend proposed                              (107,200)

Retained profit transferred to revenue reserve           116,800

Beginning stock = Sh. 1,840,000 (Sh. 3,000,000 + 1,000,000 - 2,160,000)

Average stock = Sh. 1,420,000 (Sh. 1840,000 + Sh. 1,000,000)/2

Dividend per share = Sh. 0.268 (Sh 107,200/400,000)

Earnings per share = Sh. 0.56 (Sh. 224,000/400,000)

Learn more about financial ratios at brainly.com/question/17014465

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