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
icon
Related questions
Question

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:

  1. All sales and all purchases are on credit terms.
  2. The closing inventory at 31 December 2012 was GHS20,000.
  3. There were no accruals or prepayments at the end of either 2013 or 2014.
  4. Assume that both the tax and the dividends had been paid before the end of the year.
  5. 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.

Expert Solution
steps

Step by step

Solved in 7 steps with 6 images

Blurred answer
Knowledge Booster
Income Statement Analysis
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education