The Board of Directors were worried over the dwindling financial performance and precarious financial position of the Company. The company products were ageing; the economic depression biting harder as a result of the fluctuating exchange rate due to Brexit. The Company imports 60% of the goods sold in Garden City. The fluctuating exchange rate had affected the company’s importation. Consequently, the revenue of the Company dropped significantly. You are required to: A) Calculate the following ratios for the year ended September 30, 2015 and 2016 in Columnar form: i) Return on Capital Employed ii) Total Assets Turnover iii) Quick ratio iv) Debt Equity Ratio v) Fixed Interest cover vi) Earnings Yield vii) Price Earnings Ratio Viii) Dividend Yield The first 3 has been calculated : Return on capital employed for 2016 is 40.32% and for 2015 is 86.84%. 2016 2015 Capital employed = 96500-43800 =52 700 Capital employed = 107500-60000 = 47500 Return on capital employed = 21250/52700 x 100 Return on capital employed = 41250/47500 x 100 = 40.32% = 86.84 Total asset turnover for 2016 is 1.036 and for 2015 is 1.488. 2016 2015 Total assets turnover = Revenue/Current Liabilities Total assets turnover = Revenue/Current Liabilities 100000/43800 = 1.036 160000/60000 = 1.488 Quick ratio for 2016 is 0.548 and for 2015 is 0.708. 2016 2015 Quick assets = 20000 + 4000 = 24 000 Quick assets = 37500+5000 = 42500 Quick ratio = 24000/43 800 = 0.548 Quick ratio = 60000/42500 = 0.708

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

The Board of Directors were worried over the dwindling financial performance and precarious
financial position of the Company. The company products were ageing; the economic
depression biting harder as a result of the fluctuating exchange rate due to Brexit. The
Company imports 60% of the goods sold in Garden City. The fluctuating exchange rate had
affected the company’s importation. Consequently, the revenue of the Company dropped
significantly.
You are required to:
A) Calculate the following ratios for the year ended September 30, 2015 and 2016 in Columnar
form:
i) Return on Capital Employed
ii) Total Assets Turnover
iii) Quick ratio
iv) Debt Equity Ratio
v) Fixed Interest cover
vi) Earnings Yield
vii) Price Earnings Ratio
Viii) Dividend Yield

The first 3 has been calculated :

Return on capital employed for 2016 is 40.32% and for 2015 is 86.84%.

2016	2015
Capital employed = 96500-43800 =52 700	Capital employed = 107500-60000 = 47500
Return on capital employed = 21250/52700 x 100	Return on capital employed = 41250/47500 x 100
= 40.32%	= 86.84

Total asset turnover for 2016 is 1.036 and for 2015 is 1.488.

2016	2015
Total assets turnover = Revenue/Current Liabilities	Total assets turnover = Revenue/Current Liabilities
100000/43800 = 1.036	160000/60000 = 1.488

Quick ratio for 2016 is 0.548 and for 2015 is 0.708.

2016	2015
Quick assets = 20000 + 4000 = 24 000	Quick assets = 37500+5000 = 42500
Quick ratio = 24000/43 800 = 0.548	Quick ratio = 60000/42500 = 0.708

QUESTION 2
Tenderland Plc. has been trading in merchandise for several years in Garden City. The
information below relates to the extracts from the financial statements for the past two years.
Statement of Profit or loss and other Comprehensive income for the year ended September
30.
2016
2015
£' Million
£'Million
Revenue
100.000
160.000
Gross Profit
45,000
70,000
Administrative expenses
22,500
27,500
Finance cost
10% Loan Note Interest
1250
1250
23750
28.750
Operating Profit before Tax
21,250
41,250
Less: Taxation for the year
8.000
16.000
Less: Operating Profit for the Year
13.250
25.250
Dividends paid to Equity holders
6,050
8,550

Extract of statement of Financial Position as of September 30
2016
2015
£' Million
£' Million
Assets
Non- Current Assets at Cost
50,000
70,000
Less Accumulated Depreciation
10.000
12.000
Carrying Amount
40.000
57.500
Current Assets
Inventory
32,500
7,500
Trade Receivables
20,000
5,000
Bank Balance
4.000
37.500
56,500
50.000
Total Assets
96,500
107.500
Equity and Liabilities
Ordinary Share Capital @ 50pence each
23,000
23,000
Retained earnings
17,200
10,000
10% Loan notes
12,500
12,500
10% Redeemable Preference Shares
2.000
52,700
47.500
Current Liabilities
Trade Payables
7,500
10,750
Taxation
24,000
16,000
Bank Overdrafts
12.300
33.250
43,800
60.000
Total Equity and Liabilities
96,500
107.500

Expert Solution

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Classification and Prediction of Corporate Financial Distress

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions