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A company’s capital structure at December 2002 is as follows: $m Ordinary share capital 380 Accumulated profits 120 —— 500 8% Loan notes 100 —— 600 —— The company’s income statement shows the following for the year ended 31 December 2002: $m Operating profit 40 Interest paid 8 —— 32 Taxation 10 —— 22 Dividends paid 10 —— Retained profit for year 12 —— What is the return on equity shareholders’ capital employed, using closing capital figures? A 4·4% B 2·4% C 3·7% D 5·8%

A company’s capital structure at December 2002 is as follows: $m Ordinary share capital 380 Accumulated profits 120 —— 500 8% Loan notes 100 —— 600 —— The company’s income statement shows the following for the year ended 31 December 2002: $m Operating profit 40 Interest paid 8 —— 32 Taxation 10 —— 22 Dividends paid 10 —— Retained profit for year 12 —— What is the return on equity shareholders’ capital employed, using closing capital figures? A 4·4% B 2·4% C 3·7% D 5·8%

Survey of Accounting (Accounting I)
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter15: Capital Investment Analysis
Section: Chapter Questions
Problem 15.5.2MBA: Financial leverage Costco Wholesale Corporation (COST) and Wel-Mart Stroes Inc. (WMT)reported the...
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A company’s capital structure at December 2002 is as follows:

$m

Ordinary share capital 380

Accumulated profits 120

——

500

8% Loan notes 100

——

600

——

The company’s income statement shows the following for the year ended 31 December 2002:

$m

Operating profit 40

Interest paid 8

——

32

Taxation 10

——

22

Dividends paid 10

——

Retained profit for year 12

——

What is the return on equity shareholders’ capital employed, using closing capital figures?

A 4·4%

B 2·4%

C 3·7%

D 5·8%

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