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Compute return on capital employees ratios

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Reference no: EM131175757

Balance sheet as at 31 March 2000

Fixed assets:

Sh.

Sh.

Sh.

Freehold property (Net book value)

Plant and machinery (Net book value)

Motor vehicles (Net book value)

Furniture and fittings (Net book value)

Current Assets:

Stocks

Debtors

Investments

Current liabilities:

Trade creditors

Bank overdraft

Corporation tax

Dividends payable

Financed by:

Authorised share capital - 800,000

Sh.1 ordinary shares

Issued and fully paid: 400,000 Sh.1 Ordinary shares

Capital reserve

Revenue reserve

Loan capital: 400,000 10% Sh.1 Debentures

238,400

878,400

176,000

107,200

1,000,000

400,000

   120,000

1,500,000

(1,400,000)

480,000

800,000

200,000

   200,000

1,680,000

   120,000

1,800,000

400,000

200,000

800,000

   400,000

1,800,000

Profit and loss account for the year ended 31 March 2000

Sh.

Sales (credit)

Profit after charging all expenses except interest on debentures

Less: debenture interest

Profit before tax

Corporation tax

Less: ordinary dividend proposed

Retained profit transferred to revenue reserve

4,000,000

   440,000

     40,000

   400,000

   176,000

   224,000

   107,200

   116,800

The following additional information was available:

1. The purchases for the year were Sh.2,160,000 while the cost of sales was Sh.3,000,000.

2. The market price for Golden Times Ltd. Ordinary shares as at 31 March 2000 was Sh.5

3. The company estimates the current value of its freehold property at Sh.1,100,000.

Required:

(a) Compute the following ratios for Golden Times Ltd.:
•Return on capital employees
•The profit margin
•The turnover of capital
•Current ratio;
•Liquid ratio;
•Number of days accounts receivable are outstanding;
•Property ratio;
•Stock turnover ratio;
•Dividend yield ratio;
•Price earnings ratio.

(b) Comment on Golden Times Ltd. Liquidity stating the reference points to which relevant ratios can be compared.

Reference no: EM131175757

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