Scribd
Upload
20 views12 pages

Ug1 Business & Management Examination: Question 1ai)

The document provides financial information for Precise Materials Ltd. including a trial balance, additional notes, and calculations such as the income statement, statement of financial position, and financial ratios. It includes data on the company's assets, liabilities, equity, income, expenses, and cash flows for the year ending December 2020.

Uploaded by

Aamir
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
20 views12 pages

Ug1 Business & Management Examination: Question 1ai)

The document provides financial information for Precise Materials Ltd. including a trial balance, additional notes, and calculations such as the income statement, statement of financial position, and financial ratios. It includes data on the company's assets, liabilities, equity, income, expenses, and cash flows for the year ending December 2020.

Uploaded by

Aamir
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 12

UG1 BUSINESS & MANAGEMENT EXAMINATION

Precise Materials Ltd. Trial Balance extract as at 31 December 2020


Dr £ Cr £
Accruals 8,400
Prepayments 6,100
Trade receivables 38,600
Trade payables 31,400
Admin expenses 65,800
Bad debts written off 5,900
Bank 6500
Debenture loan 2028 180,000
General reserve 50,125
Interest paid 10,000
Interim dividends 7,250
Opening inventory 15,800
Ordinary shares at £1.00 300,000
8% Preference shares £1.50 75,000
Retained profit 12,550
Revaluation reserve 26,400
Share Premium 30,000

Additional information
1. Profit before interest and taxation for the year ending 31 December 2020 is £82,000
2. Corporation tax is to be estimated at £15,000
3. Debenture interest is charged at a rate of 8% per annum
4. Inventory as at 31 December 2020 is £16,400
5. There is to be a transfer of £14,000 to the general reserve
6. Ordinary shares have been issued at £1.50 the amount received totalled £150,000 and
this was paid into the bank account. 150,000/1.50 = 100,000 new shares +
300,000 shares = 400,000 shares
7. Ordinary dividends are proposed at 6p per ordinary share at the year-end balance
400,000 shares * .06
8. Preference dividends are yet to be paid

Question 1ai)
BELLERBYS COLLEGE UG1 BUSINESS & MANAGEMENT EXAMINATION

£ £

Profit before interest and taxation 82,000


Finance cost (180000*.08) 14,400
Profit before tax 82,000
Taxation 15,000
Profit after tax 67,000
Retained profit 12,550 TOTAL

Interim dividend 7,250


Preference dividend (80,000*.08) 6,400
Ordinary dividend 24,000
Transfer to general reserve 14,000 (TOTAL)

Retained profit 12,550

1aii)

£ £
Current Assets 156,500
Bank 150000+6500 38,600
Trade receivables 6,100
Prepayments 16,400 0
Closing inventory 156,500

Current liabilities
Trade payables 31,400
Corporation tax 15,000
Preference dividend 6,400

Ordinary dividend 24,000

Accruals 8,400
Loan interest 24,400 (TOTAL)

UG1-IFA-DS-L-Jun-20 Page 2 of 12
BELLERBYS COLLEGE UG1 BUSINESS & MANAGEMENT EXAMINATION
Net current assets ‘working capital’ 217,600

1aiii)

Capital and reserves £ £


Ordinary share capital 300,000 + 100,000 400,000
Preference share capital One in table 75,000
Share premium £1.50-1= £0.50*100,000 + one in 35,000
table
General reserve one in table + point 5 64,125
Revaluation reserve One in table 26,400
Retained profit Answer from income statement 12,550

UG1-IFA-DS-L-Jun-20 Page 3 of 12
BELLERBYS COLLEGE UG1 BUSINESS & MANAGEMENT EXAMINATION

Ratio formulas

Return on capital employed ‘ROCE’:


‘[Net Profit before tax] / [share capital and reserves + non-current liabilities]’*100
Gross profit margin
‘Gross profit/sales’*100
Net profit margin
‘Net profit before tax /sales’*100
Current ratio
Current assets/current liabilities
Liquidity ratio ‘Acid test’
Current assets less closing inventory / Current liabilities
Asset turnover

Sales/ Share capital and reserves

Inventory turnover

Cost of sales / average inventory

Trade receivables collection period

‘Trade receivables/ credit sales’ *365

Trade payables payment period

‘Trade payables/ credit purchases’*365

Earnings per share

‘[Profit after tax and preference dividends]/ [number of ordinary shares in issue]’ *100

Price earnings ratio

Market price per ordinary share/ earnings per share

Dividend yield

UG1-IFA-DS-L-Jun-20 Page 4 of 12
BELLERBYS COLLEGE UG1 BUSINESS & MANAGEMENT EXAMINATION
‘Dividends per ordinary share/ market price per ordinary share’ *100

Dividend cover

[Profit after tax and preference dividends]/ Ordinary dividend

Gearing ratio

‘[Preference share capital + non-current liabilities] / [share capital and reserves + non-
current liabilities]’ * 100

Return on capital employed ‘ROCE’:


‘[Net Profit before tax] / [share capital and reserves + non-current liabilities]’*100

[82,000] / [(400,000 + 64,125) + 180,000] * 100


[82,000] / [644,125] * 100
12.73%

Gross profit margin


‘Gross profit/sales’*100

82,000/38,600 * 100
212.43%

Net profit margin


‘Net profit before tax /sales’*100

72,000/38,600 * 100
186.53%

Current ratio
Current assets/current liabilities

217,600 / 109,600
1.98

Liquidity ratio ‘Acid test’


Current assets less closing inventory / Current liabilities

201,200/ 109,600
1.836

Asset turnover
Sales/ Share capital and reserves

38,600/ 464,125
0.138

UG1-IFA-DS-L-Jun-20 Page 5 of 12
BELLERBYS COLLEGE UG1 BUSINESS & MANAGEMENT EXAMINATION

Trade receivables collection period


‘Trade receivables/ credit sales’ *365
38600/38600 * 365

365

Earnings per share


‘[Profit after tax and preference dividends]/ [number of ordinary shares in issue]’
*100

67,000+6400/400,00*100
18.35

Price earnings ratio


Market price per ordinary share/ earnings per share

Dividend yield
‘Dividends per ordinary share/ market price per ordinary share’ *100

Dividend cover
[Profit after tax and preference dividends]/ Ordinary dividend

67,000+6400/24,000
3.058

Gearing ratio
‘[Preference share capital + non-current liabilities] / [share capital and reserves +
non-current liabilities]’ * 100

75,000 + 180,000/400,000+64,125 + 180,000 * 100


39.58

UG1-IFA-DS-L-Jun-20 Page 6 of 12
BELLERBYS COLLEGE UG1 BUSINESS & MANAGEMENT EXAMINATION

UG1-IFA-DS-L-Jun-20 Page 7 of 12
BELLERBYS COLLEGE UG1 BUSINESS & MANAGEMENT EXAMINATION

UG1-IFA-DS-L-Jun-20 Page 8 of 12
BELLERBYS COLLEGE UG1 BUSINESS & MANAGEMENT EXAMINATION

UG1-IFA-DS-L-Jun-20 Page 9 of 12
BELLERBYS COLLEGE UG1 BUSINESS & MANAGEMENT EXAMINATION

UG1-IFA-DS-L-Jun-20 Page 10 of 12
BELLERBYS COLLEGE UG1 BUSINESS & MANAGEMENT EXAMINATION

UG1-IFA-DS-L-Jun-20 Page 11 of 12
UG1 BUSINESS & MANAGEMENT EXAMINATION

UG1-IFA-DS-L-Aug-20 Page 12 of 12

You might also like