(Computing interest tax savings) Returning to Study Problem 15–1, you have now found out in an investors briefing session that Sharpgas Plc have suffered a reduction in profitability in the current year to the extent that their financial accounts will reflect an operating loss before interest and tax. They assure you that this is a short-term prob- lem. Revenue for 2016 was £30 million (2015 £32 million) and costs in 2016 look to have increased by £2 million from £28 million in 2015. Interest on the historic long- term debt is payable at 10 percent, and the dividend policy reflects a 2 percent increase each year for the last 10 years, with the quantum payment for 2015 being £1.2 million. The first tranche (£4 million) of debt repayment is due in six months' time. Identify the problems and suggest options for maintaining shareholder confidence.
(Computing interest tax savings) Returning to Study Problem 15–1, you have now found out in an investors briefing session that Sharpgas Plc have suffered a reduction in profitability in the current year to the extent that their financial accounts will reflect an operating loss before interest and tax. They assure you that this is a short-term prob- lem. Revenue for 2016 was £30 million (2015 £32 million) and costs in 2016 look to have increased by £2 million from £28 million in 2015. Interest on the historic long- term debt is payable at 10 percent, and the dividend policy reflects a 2 percent increase each year for the last 10 years, with the quantum payment for 2015 being £1.2 million. The first tranche (£4 million) of debt repayment is due in six months' time. Identify the problems and suggest options for maintaining shareholder confidence.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
please answer question 15-7, thank you
Transcribed Image Text:15-7. (Computing interest tax savings) Returning to Study Problem 15–1, you have now
found out in an investors briefing session that Sharpgas Plc have suffered a reduction
in profitability in the current year to the extent that their financial accounts will reflect
an operating loss before interest and tax. They assure you that this is a short-term prob-
lem. Revenue for 2016 was £30 million (2015 £32 million) and costs in 2016 look to
have increased by £2 million from £28 million in 2015. Interest on the historic long-
term debt is payable at 10 percent, and the dividend policy reflects a 2 percent increase
each year for the last 10 years, with the quantum payment for 2015 being £1.2 million.
The first tranche (£4 million) of debt repayment is due in six months’ time. Identify the
problems and suggest options for maintaining shareholder confidence.
Transcribed Image Text:15-1. (Calculating debt ratio) (Related to Checkpoint 15.1 on page 534)
Sharpgas plc
£m
£m
Current assets
6
Current liabilities
8
Long-term debt
Shares
Non-current assets
30
20
2
Reserves
36
36
You have just taken over a portfolio of bank clients including Sharpgas Plc. Their latest
balance sheet is as above. What questions would you ask immediately with regard to
their capital structure?
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