Activity 1: Typical examination questions
Worked example 1 Use the following information to complete the ledger accounts given on the answer sheet for kwik fix ltd for the financial year ended 30 June 2011. Information | To calculate the average share price, use this figure and divide it by the no. of shares issued. 1 000 000 ÷ 500 000 shares = R2 ↓ | ||
1 | 1 July 2010 | At the beginning of the year, the company had the following opening balances: Ordinary share capital (500 000 shares) Retained income SARS (Income tax) Shareholders for dividends | R1 000 000 180 000 (ct) 9 000 130 000 |
2 | 1 July 2010 | Issued 50 000 shares to the public at R7,50 per share | |
3 | 23 July 2010 | Paid the amounts owing to SARS and the shareholders. | |
4 | 31 December 2010 | A first provisional tax payment of R112 500 was made to SARS half-way through the financial year. | |
5 | 31 December 2010 | An interim dividend of 15 cents per share was paid to shareholders. | |
6 | 31 March 2011 | Bought back 20 000 shares from a disgruntled shareholder. The directors decided to buy back these shares at R8,50 per share. | |
7 | 30 June 2011 | A second provisional tax payment of R120 000 was made to SARS at the end of the financial year. | |
8 | 30 June 2011 | Final dividends of 30 cents per share were declared at the AGM but have not yet been paid to the shareholders. | |
9 | 30 June 2011 | After the completion of the audit, the income tax figure for the year was determined as R240 000. This was calculated on a net profit figure of R800 000. | |
10 | 30 June 2011 | Show the closing transfers to the final accounts. |
Notes below refer to the information above and to the ledger accounts below ( 1 – 10): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1 | The balances for SARS (Income tax) and Shareholders for dividends are the amounts that were not paid last year and need to be paid this year. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2 | Shares issued to the public at issue price of R7,50 per share | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3 | The amounts owing to SARS and the shareholders from last year are now being paid. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4 7 | The first provisional tax payment is always made half-way (6 months) into the financial year and the second provisional tax payment is made at the end of the financial year. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5 | The interim dividend is paid during the year | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8 | The final dividend is declared (not paid) at the end of the financial year. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6 | Shares bought back at R8,50 per share from a shareholder. New average price to be calculated. To calculate average price, find the value of Ordinary Share Capital, R1 375 000 ÷ 55 000 = R2,50). It means that you’re only going to claim R2,50 per share and the rest will be claimed from Retained Income. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
9 | The income tax figure for the year is the amount of tax the company owes calculated on the net profit for the year. This needs to be compared to the provisional tax payments made to see whether the company owes SARS more tax (liability) or whether SARS owes the company (asset). The net profit of R800 000 is calculated in the Profit and Loss Account and transferred to the Appropriation Account. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
10 | The final accounts include the Trading Account, Profit and Loss Account (covered in this example) and the Appropriation Account. EXAMPLE OF A TRADING ACCOUNT AND PROFIT AND LOSS ACCOUNT (exactly the same as a sole trader or partnership)
PROFIT AND LOSS ACCOUNT (F2) N
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General Ledger of Kwik Fix Ltd
Shares issued: 500 000 + 50 000 = 550 000 shares issued.
Average price of shares:
R1 000 000 + R375 000 = R1 375 000
R1 375 000 ÷ 550 000 shares = R2,50
Balance Sheet Section Dr Ordinary Share Capital Cr | |||||||||
2011 Mar | 31 | Bank 6 (20 000 × R2,50) | CPJ | 50 000 | 2010 July | 1 | Balance | b/d | 1 000 000 |
31 | Bank 2 (50 000 × R7,50) | GJ | 375 000 | ||||||
Balance | c/d | 1 325 000 | |||||||
1 375 000 | 1 375 000 | ||||||||
2011 July | 1 | Balance | b/d | 1 325 000 |
Balance Sheet Section Dr SARS (Income tax) Cr | |||||||||
2010 July | 23 | Bank | CPJ | 9 000 | 2010 July | 1 | Balance | b/d | 9 000 |
2010 Dec | 31 | Bank | CPJ | 112 500 | 2011 June | 30 | Income tax | GJ | 240 000 |
2011 June | 30 | Bank | CPJ | 120 000 | |||||
Balance | c/d | 7 500 | 249 000 | ||||||
249 000 | |||||||||
2011 July | 1 | Balance | b/d | 7 500 |
The Income Tax assessment was more than the provisional payments. Therefore the balance is on the credit side making it a liability (Trade and Other Payables).
Nominal Accounts Section Dr INCOME TAX Cr | ||||||||
2011 June | 30 | SARS (Income tax) | GJ | 240 000 | 2011 June | Appropriation 10 | GJ | 240 000 |
Balance Sheet Section Dr SHAREHOLDERS FOR DIVIDENDS Cr | |||||||||
2010 July | 23 | Bank | CPJ | 130 000 | 2010 July | 1 | Balance | b/d | 130 000 |
2011 June | 30 | Balance | c/d | 159 000 | 2011 June | 1 | Dividends on ordinary shares | GJ | 159 000 |
289 000 | 289 000 | ||||||||
2011 July | 1 | Balance | b/d | 159 000 |
The R159 000 is the final dividend and is still owing to the shareholders. This is a liability (Trade and Other Payables).
Nominal accounts section Dr DIVIDENDS ON ORDINARY SHARES Cr | |||||||||
2010 Dec | 31 | Bank (550 000 × 0.15) | CPJ | 82 500 | 2011 June | 30 | Appropriation | GJ | 241 500 |
2011 June | 30 | Shareholders for dividends 8 (530 000 × 0.30) | GJ | 159 000 | |||||
241 500 | 241 500 |
There are three different ways of preparing the Appropriation account. Choose the alternative that you have been taught.
Option 1: The Retained Income for the year is transferred from the Appropriation account to the Retained Income account.
Balance Sheet Section Dr RETAINED ACCOUNT Cr | |||||||||
2011 Mar | 31 | Bank (20 000 × R6) | GJ | 120 000 | 2011 June | 30 | Balance | b/d | 180 000 |
June | 30 | Balance | c/d | 378 500 | Appropriation | GJ | 318 500 | ||
498 500 | 498 500 | ||||||||
July | 1 | Balance | 378 500 |
Final accounts section Dr APPROPRIATION ACCOUNT Cr | |||||||||
2011 June | 30 | Income tax | GJ | 240 000 | 2011 June | 30 | Profit & loss | GJ | 800 000 |
Dividends on ordinary shares | GJ | 241 500 | |||||||
Retained income | GJ | 318 500 | |||||||
800 000 | 800 000 |
Option 2: The Retained Income at the beginning of the year less the buy-back of shares adjustment is transferred to the Appropriation account. The Retained Income (after the share buy-back adjustment) at the end of the year is transferred from the Appropriation account to the Retained Income account
Balance sheet section Dr RETAINED ACCOUNT Cr | |||||||||
2011 Mar | 31 | Bank (20 000 × R6) | GJ | 120 000 | 2010 July | 1 | Balance | b/d | 180 000 |
June | 30 | Appropriation | GJ | 60 000 | 180 000 | ||||
2011 June | Appropriation | GJ | 378 500 |
Final accounts section Dr APPROPRIATION ACCOUNT Cr | ||||||||
2011 June | 30 | Income tax | GJ | 240 000 | 2011 June | Profit & loss | GJ | 800 000 |
Dividends on ordinary shares | GJ | 241 500 | Retained Income (180 000 – 120 000) | 60 000 | ||||
Retained income | GJ | 378 500 | ||||||
860 000 | 860 000 |
Option 3: The Retained Income at the beginning of the year is transferred to the Appropriation account.
The Retained Income (before the share buy-back adjustment) at the end of the year is transferred from the Appropriation account to the Retained Income account
Balance sheet section Dr RETAINED ACCOUNT Cr | |||||||||
2011 Ma | 31 | Bank (20 000 × R6) | GJ | 120 000 | 2011 July | 1 | Balance | b/d | 180 000 |
June | 30 | Appropriation | GJ | 180 000 | 2011 June | 30 | Appropriation | GJ | 498 500 |
Balance | c/d | 378 500 | |||||||
678 500 | 678 500 | ||||||||
2011 July | 1 | Balance | b/d | 378 500 |
Final accounts section Dr APPROPRIATION ACCOUNT Cr | |||||||||
2011 June | 30 | Income tax | GJ | 240 000 | 2011 June | 30 | Profit & loss | GJ | 800 000 |
Dividends on ordinary shares | GJ | 241 500 | Retained Income | 180 000 | |||||
Retained income | GJ | 498 500 | |||||||
980 000 | 980 000 |
Practice task 1
General ledger of kwik fix ltd
Balance sheet section
Dr Ordinary Share Capital Cr | |||||||
Dr Retained Income Cr | |||||||
Dr sars (Income tax) Cr | |||||||
Dr Shareholders for Dividends Cr | |||||||
Nominal section
Dr Income Tax Cr | |||||||
Dr Dividends on Ordinary Shares Cr | |||||||
Dr Dividends on Ordinary Shares Cr | |||||||
Final accounts section
Dr Appropriation Account Cr | |||||||
Worked Example 2
Prepare the Income statement for the year ended 30 June 2011.
Information
1. ANEESA LTD
PRE-ADJUSTMENT TRIAL BALANCE AS AT 30 JUNE 2011
DEBIT | CREDIT | |
Balance Sheet Accounts Section | R | R |
Ordinary share capital | 2 820 000 | |
Retained income | 684 460 | |
Mortgage loan: Joy Bank | 804 500 | |
Land and buildings | 2 097 000 | |
Vehicles | 814 000 | |
Equipment | 616 000 | |
Accumulated depreciation on vehicles | 294 800 | |
Accumulated depreciation on equipment | 341 000 | |
Trading stock | 955 000 | |
Consumable stores on hand | 15 000 | |
Bank | 313 100 | |
Petty cash | 3 300 | |
Debtors' control | 396 000 | |
Creditors' control | 487 300 | |
SARS (Income tax)(This amount is the provisional tax payment.) | 261 800 | |
Provision for bad debts | 18 000 | |
Fixed deposit: Broad Bank (8% p.a.) | 495 000 |
Nominal Accounts Section | ||
Sales | 10 500 000 | |
Debtors’ allowances (Remember to subtract debtors’ allowances from sales.) | 145 200 | |
Cost of sales | 7 487 000 | |
Rent income | 176 880 | |
Interest income (on fixed deposit) | 26 630 | |
Bad debts recovered | 2 300 | |
Directors' fees | 840 000 | |
Audit fees | 73 800 | |
Salaries and wages | 660 000 | |
Packing material | 23 100 | |
Marketing expenses | 480 000 | |
Sundry expenses | 63 770 | |
Bad debts | 12 000 | |
Ordinary share dividends (This is the interim dividend. DO NOT include on the Income Statement!) | 404 800 | |
16 155 870 | 16 155 870 |
2. ADJUSTMENTS
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Answer to worked example 2
1. Aneesa ltd : income statement for the year ended 30 june 2011
Sales (10 500 000 – 145 200) | 10 354 800 | |
Cost of sales (7 487 000) | (7 487 000) | |
Gross profit | 2 867 800 | |
Other operating income | 164 660 | |
F | Rent income (176 880 – 14 5203) | 162 360 |
Bad debt recovered (2 300) | 3 2 300 | |
Gross operating income | 3 032 460 | |
Operating expenses | (2 392 600) (This is the total of the operating expenses. REMEMBER to subtract this from gross operating income.) | |
B | Directors fees (840 000 + 22 500) | 862 500 |
Audit fees (73 800) | 73 800 | |
Salaries and wages (660 000) | 660 000 | |
A Packing material (23 1003 – 4 2603) | 18 840 | |
Marketing expenses (480 000) | 480 000 | |
Sundry expenses (63 770) | 63 770 | |
D | Bad debts (12 0003 +19 20033) | 31 200 |
E | Provision for bad debts adjustment (18 840 3– 18 000) | 840 |
G | Depreciation V: 122 100 3 E: 4 0003 + 22 700 | 148 800 |
A | Trading stock deficit | 52 850 |
Operating profit | 639 860 | |
C | Interest income(26 630 + 12 970) | 39 600 |
Profit before interest expenses/finance cost | 679 460 | |
H | Interest expenses/finance cost (458 000 + 804 500 – 1 125 000) or (1 125 000 – 458 000 – 804 500) | (137 500) |
Profit before tax | 541 960 | |
I | Income tax | (150 285) |
Net profit after tax | 391 675 |
[52]
Worked example 3
Balance Sheet and notes
Use the following steps to prepare a balance sheet from the given information:
Example adapted from November 2009 NCS exam paper
Practice task 3
You are provided with information relating to Qwando Limited for the financial year ended 30 June 2011.
Prepare the Retained income note. (18)
Prepare the Balance Sheet on 30 June 2011. (36)
Information
R | |
Ordinary share capital (see information 2 below) | 2 400 000 |
Retained income (on 1 July 2010) | 738 000 |
Shareholders for dividends (see information 4 below) | 60 000 |
Fixed deposit at Supa Bank (see information 5 below) | ? |
Mortgage Bond from Supa Bank (see information 7 below) | 3 881 000 |
Fixed/tangible assets | ? |
Debtors’ control | 45 000 |
Creditors’ control | 85 200 |
Creditors for salaries | 12 300 |
Provision for bad debts (see Information 6 below) | ? |
SARS (Income tax – provisional tax payments) | 400 000 |
SARS (PAYE) | 6 650 |
Expenses payable (accrued) | 7 200 |
Income receivable (accrued) | 7 950 |
Bank (favourable balance) | 168 450 |
Trading stock | 129 600 |
Consumable stores on hand | 5 600 |
SUPA BANK | |
LOAN STATEMENT ON 30 JUNE 2011 | |
Balance on 1 July 2010 | R384 000 |
Interest charged | 57 600 |
Monthly instalments in terms of the loan agreement (12 × R8 800) (These monthly instalments include interest on the capital repayments of the loan) (The monthly capital repayments on the loan will remain constant until the loan has been paid in full on 30 June 2019. | 105 600 |
Balance on 30 June 2011 | R336 000 |
Answers to practice task 3
RETAINED INCOME | R | |
Balance on the last day of the previous year | 738 000 | |
3 | Net profit after tax for the period(1 250 000 – 30%) | 875 000 |
2 | Retained income on 40 000 shares repurchased (40 000 × R1,50) | (60 000) |
(Total dividends (interim and final) are shown here.)→ | Ordinary share dividends | (406 000) |
4 | Paid (interim) (700 000 shares × 20c) | 140 000 |
2 & 4 | Recommended (final) (760 000 shares × 35c) | 266 000 |
Balance on the last day of the current year | 1 147 000 |
[16]
Qwando Limited
Balance Sheet on 30 June 2011
ASSETS | ||
NON CURRENT ASSETS | 3 921 000 | |
Fixed / tangible assets (4 021 000) | 3 881 000 (Fixed assets are always shown at book value on the Balance Sheet.) | |
Financial assets | ||
5 | Fixed deposit: Supra Bank (60 000 – 20 000) | 40 000 |
CURRENT ASSETS | 219 350 | |
Inventories (129 6003 + 5 600) | 135 200 | |
6 | Trade and other receivables (45 0003 + 7 9503 – 2 2503 + 25 000) (Amount owed by SARS to the business. This implies the business overpaid its taxes to SARS.) | 75 700 |
5 | Cash and cash equivalents (168 450 + 20 000 – 120 000- 60 000) | 8 450 |
TOTAL ASSETS | 4 140 350 | |
EQUITY AND LIABILITIES | ||
CAPITAL AND RESERVES | 3 427 000 | |
2 | Ordinary share capital (2 400 000 – 120 000) | 2 280 000 |
2 | Retained income (see note on previous page) | 1 147 000 |
NON-CURRENT LIABILITIES | 288 000 | |
Mortgage loan: Supa Bank (336 000 – 48 000) | 288 000 | |
CURRENT LIABILITIES | 425 350 | |
Trade and other payables (85 200 + 12 300 + 6 650 + 7 200) | 111 350 | |
Shareholders for dividends | 266 000 (This is the final dividend declared at the end of the year). | |
Current portion of loan | 48 000 | |
TOTAL EQUITY AND LIABILITIES | 4 140 350 |
[38]
The numbers in this column refer to the explanations on the next page.
Explanations of each adjustment
2. Shares: 3. Net profit after tax must be calculated by subtracting income tax from net profit before tax. This must be entered in the retained income note. 4. Dividends: 5.Calculation of short term portion of fixed deposit: 6. Provision for bad debts is calculated at 5% of debtors control: 5% of R45 000 = R2 250. 7. Repayments of the capital amount of the loan that will be made in the next 12 months must be subtracted from the non-current liabilities and shown under current liabilities as a ‘current portion of loan’. |
Practice task 3 (continued)
RETAINED INCOME | R |
Balance on the last day of the previous year | |
Balance on the last day of the current year | |
QWANDO LIMITED BALANCE SHEET ON 30 JUNE 2011 | |
ASSETS | |
NON CURRENT ASSETS | |
Fixed/tangible assets | |
Financial assets | |
Fixed deposit: Supra Bank | |
CURRENT ASSETS | |
TOTAL ASSETS | |
EQUITY AND LIABILITIES | |
CAPITAL AND RESERVES | |
NON-CURRENT LIABILITIES | |
Mortgage loan: Supa Bank | |
CURRENT LIABILITIES | |
TOTAL EQUITY AND LIABILITIES |
[38]
Worked example 4
Preparation of the cash flow statement
Practice task 4
Prepare the cash flow statement (all relevant notes have been done for you). (15)
Additional information
Extract from balance sheet
2012 | 2011 | Flow of cash (Remember we are looking for the flow of cash. This means you will need to calculate the difference between this year’s and last year’s figures, to determine the figures to place on the Cash Flow Statement.) | ||
Ordinary share capital | R471 600 | R410 000 | **see note below | |
Retained income | R10 400 | R9 000 | This has no effect on a cash flow statement. | |
Fixed deposit | R28 000 | R23 000 | (R5 000) | (Outflow) |
Loan from Beta Bank (interest is not capitalised) | R74 000 | R80 000 | (R6 000) | (Outflow) |
Bank | R35 300 | R10 040 | R25 260 | Inflow |
Cash float | R2 000 | R2 000 | R0 | No change |
** During the year the following transactions took place regarding share capital:
Worked example 5: Comment on the liquidity position of the company
Financial indicator | 2010 | 2011 |
Current ratio | 1,3 : 1 | 2,1 : 1 |
Acid test ratio | 0,6 : 1 | 1,4 : 1 |
Worked example 6: Comment on the earnings per share (EPS) and dividends per share (DPS) of the company
Earnings per share is the ‘if’; if all the profit after tax was declared as dividends, the earnings would have been 35c per share. However what “really happened” is that dividends were declared of only 25c per share. The difference is the profit that the company kept called ‘retained income’.
Financial indicator | 2010 | 2011 |
Earnings per share (EPS) | 35c per share | 15c per share |
Dividends per share (DPS) | 25c per share | 20c per share |
Worked example 7: Comment on the debt/equity ratio of the company
Financial indicator | 2010 | 2011 |
Debt/equity ratio | 0.6:1 | 0,4:1 |
Worked example 8: Comment on the percentage return on shareholders’ equity (ROSHE) of the company
Financial indicator | 2010 | 2011 |
% return on shareholders’ equity (ROSHE) | 18 % | 24 % |
Formulae: Financial indicators
Financial indicator | How it is calculated - formula | Answer shown as/in |
1. Gross profit on cost of sales (mark-up) | Gross profit × 100 Cost of sales 1 | % |
2. Gross profit on sales | Gross profit × 100 Sales 1 | % |
3. Operating expenses on sales | Operating expenses × 100 Sales 1 | % |
4. Operating profit on sales | Operating profit × 100 Sales 1 | % |
5. Net profit after tax on sales | Net profit after tax × 100 Sales 1 | % |
6 .Solvency ratio | Total assets : Total liabilities | Ratio (ℵ : 1) |
7. Net assets (shareholders’ equity) | Total assets − Total liabilities | Rands |
8. Current ratio | Current assets : Current liabilities | Ratio (ℵ : 1) |
9. Acid-test ratio | (Receivables + cash) : Current liabilities OR (Current assets – inventories) : Current liabilities | Ratio (ℵ : 1) |
10. Turnover rate of stock | Cost of sales Average stock | Times per year |
11. Period for which enough stock is on hand/period of stock on hand (stock holding period) | Average stock × 365 Cost of sales 1 | Number of days |
12. Debtors average collection period | Average debtors × 365 Credit sales 1 | Number of days |
13. Creditors average payment period | Average creditors × 365 Credit sales 1 | Number of days |
14. Debt/equity ratio | Non-current liabilities : Shareholders’ equity | Ratio (ℵ : 1) |
15. Return on equity (shareholders’ equity) | Net profit after tax × 100 Average shareholders’ equity 1 | % |
16. Return on total capital employed | Net profit before tax + interest on loans × 100 Average shareholders’ equity + average loans 1 | % |
17. Earnings per share (‘if’) | Net profit after tax × 100 Number of issued shares 1 | Cents |
18. Dividends per share (what really happened) | Interim & final dividends × 100 Number of issued shares 1 | Cents |
19. Net asset value per share (this is the real value of the share) | Shareholders’ equity × 100 Number of issued shares 1 | Cents |
OTHER IMPORTANT FORMULAE:
To calculate the selling price (SP): Shareholders’ equity = Ordinary share capital + Retained income
SP = CP × 100 + mark-up
100
To calculate the cost price (CP):
CP = SP × 100
100 + mark-up
Worked example 9
(This question shows some of the basic financial indicators that will help you earn easy marks)
You are provided with information relating to Glebo Limited for the year ended 30 June 2011.
Practice task 5
Use the given information to calculate the following financial indicators for 2011. (31)
Information
Glebo Limited
Extrac t from income statement for the year ended 30 june 2011
2011 | |
Sales | 9 000 000 |
Cost of sales | 5 625 000 |
Operating profit | 1 423 200 |
Income tax | 426 000 |
Net profit after tax | 904 000 |
Glebo limited
Balance sheet as at 30 june 2011
2011 | |
ASSETS | |
Non-current assets | 4 626 000 |
Fixed assets | 4 326 000 |
Financial assets | 300 000 |
Current assets | 2 557 000 |
Inventories (all trading stock) | 1 640 000 |
Trade and other receivables (all trade debtors) | 810 000 |
SARS (Income tax) | 0 |
Cash and cash equivalents | 107 000 |
TOTAL ASSETS | 7 183 000 |
EQUITY AND LIABILITIES | |
Ordinary shareholders’ equity | 4 123 000 |
Ordinary share capital (1 100 000 shares ) | 2 910 000 |
Retained income | 1 213 000 |
Non-current liabilities | 1 980 000 |
Mortgage loan: Jozi Bank (13% p.a.) | 1 980 000 |
Current liabilities | 1 080 000 |
Trade and other payables (all trade creditors) | 705 000 |
SARS (Income tax) | 32 000 |
Shareholders for dividends | 275 000 |
Bank overdraft | 0 |
Current portion of loan | 68 000 |
TOTAL EQUITY AND LIABILITIES | 7 183 000 |
Answer to practice task 5
1 | Calculate % gross profit on cost of sales (mark-up) [4] (Sales – cost of sales) × 100 = 9 000 000 – 5 625 000 × 100 Cost of sales 5 625 000 = 3 375 000 × 100 5 625 000 = 60% |
2 | Calculate % net profit on sales [3] Net profit after tax × 100 = 904 000 × 100 Sales 9000 000 = 10% |
3 | Calculate % operating profit on sales [3] Operating profit × 100 = 1 423 000 × 100 Sales 9 000 000 = 15,8% |
4 | Calculate current ratio [3] Current assets ÷ current liabilities = 2 557 000 ÷ 1 080 000 = 2,4 : 1 |
5 | Calculate acid-test ratio [4] (Current assets – stock) ÷ current liabilities = (2 557 000 – 1 640 000) ÷ 1 080 000 = 917 000 ÷ 1 080 000 = 0,85 : 1 |
6 | Calculate debt/equity ratio [3] Non-current liabilities ÷ ordinary shareholders’ equity = 1 980 000 ÷ 4 123 000 = 0,48 : 1 |
7 | Calculate solvency ratio [4] Total assets ÷ total liabilities = 7 183 000 ÷ (1 980 000 + 1 080 000) = 7 183 000 ÷ 3 060 000 = 2,3: 1 |
8 | Calculate net asset value per share [4] Ordinary shareholders’ equity × 100 = 4 123 000 × 100 Number of shares issued 1 1 100 000 1 = 374,8 cents per share (Ordinary share capital ÷ par value of shares) |
9 | Calculate earnings per share [3] Net profit after tax × 100 = 904 000 × 100 Number of shares issued 1 1 100 000 1 = 82,2 cents per share |
Multiply by 100 in order to get the answer in cents per share.