Calculate ratios which will be of interest to investors

Assignment Help Financial Accounting

Reference no: EM13947352

The following financial statements relate to Charity plc:

Income statement (profit and loss account) for year ended 30 September Year 4
Revenue	£000s	£000s 2,480
Cost of sales		(1,100)
Gross profit		1,380
Administration and selling expenses		(678)
Operating profit		702
Debenture interest		(31)
Profit before taxation		671
Taxation		(154)
Profit for equity holders		517

Note: The directors have recommended a dividend of 11.4 pence per share in total in respect of Year 4, to be paid following approval at the next annual general meeting.

Statement of financial position (balance sheet) as at 30 September Year 4

	£000s	£000s
Non-current assets, net of depreciation		785
Current assets:
Inventories (stocks)		341
Trade receivables (debtors)		801
Cash		110
Total current assets		1,252
Total assets		2,037
less: Current liabilities
Trade payables (creditors)		(90)
Other payable and accruals		(654)
Total current liabilities		(744)
Net current assets		508
Total assets less current liabilities		1,293
Non-current liabilities
7% debentures		(440)
Total liabilities		(1,184)
Net assets		853
Share capital and reserves
Issued share capital
(1,360,000 ordinary shares of 25p nominal value)		340
Retained earnings		513
		853

Required

(a) Calculate ratios which measure:

(i) Liquidity and the use of working capital;

(ii) Management performance; and

(iii) Gearing.

(b) Explain how each ratio would help in understanding the financial position and results of the company.

Reference no: EM13947352

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