Reference no: EM132274357

Question 1:

The following information is provided for Bright Creative Ltd.

	2012 '000	2013 '000	2014 '000
Net assets	1000	1100	1200
Total liabilities	1200	1600	1500
Paid-up capital ($1)* No. of Ordinary Shares	800	800	800
Retained earnings & reserves	200	300	400
Profit before interest and tax	270	294	325
Interest	120	160	160
Taxation	45	40	41
Dividends per share	$0.05	$0.06	$0.07
Average market price per share	$1.08	$1.12	$1.23

* All share initially issued at $1.

A. Calculate for each year:
I. Gearing ratio;
II. Earnings per share;
III. Price earnings ratio (P/E);
IV. Dividend yield;
V. Dividend pay-out ratio;
VI. Return on owner equity for 2013 and 2014.

B. Discuss any significant trends or anomalies for each of the Ratios above (i.e. I, II, III, IV, V and VI).

Question 2:

The following Ratios are abstracted from the financial reports of Western Digi Ltd, which appear to have a concern with liquidity and efficiency for the years 2012 through to 2014.

Ratio	2012	2013	2014	Industry Average 2014
Current Ratio	1.6:1	1.8:1	1.9:1	2.1:1
Acid Ratio	1.2:1	1.1:1	0.9:1	1.1:1
Inventory turnover period	31.3 days	33.4days	37.9days	27.4days
Average settlement period for debtors	47.3 days	45.2days	41.3days	45.1days
Average settlement period for creditors	74.5days	70.2days	66.5days	62.1days
Working capital cycle (days)	4.1days	8.4days	12.7days	10.4days

You as the Management Accountant of Western Digi Ltd, are requested by the CEO to provide a report based on the above analysis (current Tax Rates can be found on the Inland Revenue Department).