AA LIMITED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR TO 31 DECEMBER 2014 Sales 2013 GHS’000 160 2014 GHS’000 200 Cost of goods sold (96) (114) Gross Profit 64 86 Operating expenses (30) (34) Debenture Interest (5) (5) Net profit before tax 29 47 Tax (9) (12) Net profit after tax 20 35 Dividend paid: Preference shares (2) (2) Ordinary shares (8) (10) (10) (12) Retained profit 10 23 STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2014 Non-current assets (@ net book value) 2013 GHS’000 300 2014 GHS’000 320 Current Assets: Inventories 15 20 Trade debtors 40 50 Cash and bank 3 1 58 71 Current Liabilities: Trade creditors (25) (35) Net current assets 33 36 333 356 Capital and reserves: Share capital (GHS1 ordinary shares) 200 200 Preference shares (GHS1 shares; 8%) 25 25 Retained earnings 58 81 Long-term Liabilities: 283 306 10% Debentures 50 50 333 356 Additional information: All sales and all purchases are on credit terms. The closing inventory at 31 December 2012 was GHS20,000. There were no accruals or prepayments at the end of either 2013 or 2014. Assume that both the tax and the dividends had been paid before the end of the year. The market price of the ordinary shares at the end of both years was estimated to be GHS1.26 and GHS2.97 respectively. REQUIRED: (a) Calculate the following ratios for both 2013 and 2014. (i) Liquidity ratios: current ratio and acid test ratio. (ii) Profitability: return on capital employed using profit before tax and gross profit ratio. (iii) Efficiency ratios: inventory turnover ratio, trade debtors’ collection period and trade creditors’ payment period.

AA LIMITED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR TO 31 DECEMBER 2014 Sales 2013 GHS’000 160 2014 GHS’000 200 Cost of goods sold (96) (114) Gross Profit 64 86 Operating expenses (30) (34) Debenture Interest (5) (5) Net profit before tax 29 47 Tax (9) (12) Net profit after tax 20 35 Dividend paid: Preference shares (2) (2) Ordinary shares (8) (10) (10) (12) Retained profit 10 23 STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2014 Non-current assets (@ net book value) 2013 GHS’000 300 2014 GHS’000 320 Current Assets: Inventories 15 20 Trade debtors 40 50 Cash and bank 3 1 58 71 Current Liabilities: Trade creditors (25) (35) Net current assets 33 36 333 356 Capital and reserves: Share capital (GHS1 ordinary shares) 200 200 Preference shares (GHS1 shares; 8%) 25 25 Retained earnings 58 81 Long-term Liabilities: 283 306 10% Debentures 50 50 333 356 Additional information: All sales and all purchases are on credit terms. The closing inventory at 31 December 2012 was GHS20,000. There were no accruals or prepayments at the end of either 2013 or 2014. Assume that both the tax and the dividends had been paid before the end of the year. The market price of the ordinary shares at the end of both years was estimated to be GHS1.26 and GHS2.97 respectively. REQUIRED: (a) Calculate the following ratios for both 2013 and 2014. (i) Liquidity ratios: current ratio and acid test ratio. (ii) Profitability: return on capital employed using profit before tax and gross profit ratio. (iii) Efficiency ratios: inventory turnover ratio, trade debtors’ collection period and trade creditors’ payment period.

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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AA LIMITED

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR TO 31 DECEMBER 2014

Sales	2013 GHS’000 160	2014 GHS’000 200
Cost of goods sold	(96)	(114)
Gross Profit	64	86
Operating expenses	(30)	(34)
Debenture Interest	(5)	(5)
Net profit before tax	29	47
Tax	(9)	(12)
Net profit after tax	20	35
Dividend paid:
Preference shares	(2)	(2)
Ordinary shares	(8)	(10)
	(10)	(12)
Retained profit	10	23

STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2014

Non-current assets (@ net book value)	2013 GHS’000 300	2014 GHS’000 320
Current Assets: Inventories	15	20
Trade debtors	40	50
Cash and bank	3	1
	58	71
Current Liabilities:
Trade creditors	(25)	(35)
Net current assets	33	36
	333	356

Capital and reserves: Share capital (GHS1 ordinary shares)	200	200
Preference shares (GHS1 shares; 8%)	25	25
Retained earnings	58	81
Long-term Liabilities:	283	306
10% Debentures	50	50
	333	356

Additional information:

All sales and all purchases are on credit terms.
The closing inventory at 31 December 2012 was GHS20,000.
There were no accruals or prepayments at the end of either 2013 or 2014.
Assume that both the tax and the dividends had been paid before the end of the year.
The market price of the ordinary shares at the end of both years was estimated to be GHS1.26 and

GHS2.97 respectively.

REQUIRED:

(a) Calculate the following ratios for both 2013 and 2014.

(i) Liquidity ratios: current ratio and acid test ratio.

(ii) Profitability: return on capital employed using profit before tax and gross profit ratio.

(iii) Efficiency ratios: inventory turnover ratio, trade debtors’ collection period and trade creditors’ payment period.

(iv) Investment ratios: dividend yield, dividend per share and earnings per share.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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