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2 years ago

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

Business

1 answer:

daser333 [38]2 years ago

7 0

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

<h3>(i) Return on capital employed:</h3>

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

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

<h3>(ii) The profit margin:</h3>

= Profit after tax/Sales revenue x 100

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

<h3>(iii) The turnover of capital:</h3>

= Sales Revenue/Equity

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

<h3>(iv) Current ratio:</h3>

= Current Assets/Current Liabilities

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

<h3>(v) Liquid ratio:</h3>

= Current Assets less Stocks /Current Liabilities

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

<h3>(vi) Number of days accounts receivable are outstanding:</h3>

= Average Accounts Receivable/Sales Revenue x 365

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

= 36.5 days

<h3>(vii) Proprietary ratio:</h3>

= Shareholders equity/Total assets x 100

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

<h3>(viii) Stock turnover ratio:</h3>

= Cost of goods sold / Average stock

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

<h3>(ix) Dividend yield ratio:</h3>

= Dividend per share/Price per share

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

<h3>(x) Price earnings ratio:</h3>

= Market price per share/Earnings per share

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

<h3>Data and Calculations:</h3>

Golden Times Ltd

<h3>Balance sheet</h3>

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

<h3>Profit and loss account</h3>

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)

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