he following is an extract from the trial balance of Tempo Ltd on 30 June 2022: £ Land and buildings 114 000 Equipment 210 000 Investment (80 000 shares of £1 each in Rhythm Ltd at cost price) 650 000 Inventory (30/6/2008 - £382 000) 418 000 Trade receivables (30/6/2021 – £180 000) 206 000 Cash and cash equivalents 92 000
he following is an extract from the trial balance of Tempo Ltd on 30 June 2022: £ Land and buildings 114 000 Equipment 210 000 Investment (80 000 shares of £1 each in Rhythm Ltd at cost price) 650 000 Inventory (30/6/2008 - £382 000) 418 000 Trade receivables (30/6/2021 – £180 000) 206 000 Cash and cash equivalents 92 000
he following is an extract from the trial balance of Tempo Ltd on 30 June 2022: £ Land and buildings 114 000 Equipment 210 000 Investment (80 000 shares of £1 each in Rhythm Ltd at cost price) 650 000 Inventory (30/6/2008 - £382 000) 418 000 Trade receivables (30/6/2021 – £180 000) 206 000 Cash and cash equivalents 92 000
he following is an extract from the trial balance of Tempo Ltd on 30 June 2022: £ Land and buildings 114 000 Equipment 210 000 Investment (80 000 shares of £1 each in Rhythm Ltd at cost price) 650 000 Inventory (30/6/2008 - £382 000) 418 000 Trade receivables (30/6/2021 – £180 000) 206 000 Cash and cash equivalents 92 000 Share capital: Ordinary share capital including premium 450 000 Preference share capital 200 000 Retained earnings: Balance – beginning of year 160 000 Retained profit for the year 40 000 12% Long term loan 420 000 Trade payables (30/6/2021 – £190 000) 210 000 Tax payable 110 000 Dividends payable 100 000 Additional information: 1. Issued share capital: - 400 000 ordinary shares of £1 each - 40 000 10% preference shares of £5 each. 2. Gross profit for the year amounted to £1 344 000 and represents 40% of turnover for the year. 3. All sales and all purchases are on credit. 4. Income from investment for the year amounted to £24 000. 5. The dividends payable represents the total amount of dividends declared on ordinary shares for the year. All preference dividends were paid up to date. 6. No further distribution of net profit other than dividends was made during the year. 7. No tax was outstanding at the beginning of the year. 8. The following ratios, calculated for the previous financial year, are available: Receivables collection period – 25 days Payables payment period – 30 days Number of days inventory on hand – 60 days
REQUIRED: 1. Calculate the following ratios in respect of the year ended 30 June 2022: (Round off to two decimal points) a) Rate of return on investment
b) Earnings per ordinary share
c) Receivables collection period in days
d) Payables payment period in days
e) Number of days inventory on hand
2. Analyse and interpret the following ratios calculated above a) Receivables collection period
b) Payables payment period
c) Number of days inventory on hand
Definition Definition Type of stock which is granted priority over dividend distributions as compared to common stockholders. Preferred stocks also do not carry any voting rights. Notably, in a case where a company is going to be liquidated, preferred stockholders have a priority claim on the value of assets of the company as quoted in the balance sheet, as compared to the common stockholders.
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