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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