| 1.96 | Unnamed: 1 | Unnamed: 2 | Unnamed: 3 | Unnamed: 4 | Unnamed: 5 | Unnamed: 6 | Unnamed: 7 | SOLUTION |
|---|---|---|---|---|---|---|---|---|
| a) | Equity Gearing Ratio | Adeyo PLC | Buto PLC | MAX MARK 2 | ||||
| (£300,000+£100,000):£800,000 | (£250,000+£150,000): £600,000 | |||||||
| 0.5:1 | -1.0 | 0.67:1 | -1.0 | Ratio must be shown x:1 | ||||
| b) | Justify which company would give the best return to Ordinary Shareholders in periods of high profit. | MAX MARK 1 | ||||||
| Atholl plc (1) would give the best return in times of high profit as it has a highest gearing ratio. (1) | ||||||||
| c) | Adeyo plc (£) | |||||||
| Operating Profit | 650000 | Award corporation tax for 1 mark if Debenture finance cost not included. | ||||||
| less Debenture finance cost | 8000 | -1.0 | ||||||
| 642000 | ||||||||
| less Corporation Tax | 160500 | -1.0 | ||||||
| PROFIT FOR THE YEAR AFTER TAX | 481500 | If no preference dividend included award 1 mark for Profit available to ordinary shareholders | ||||||
| d) | Less Preference dividend | 18000 | -1.0 | |||||
| Profit available to ordinary shareholders | 463500 | MAX MARK 2 | ||||||
| Retained Profit | 278100 | Where the Retained Profit figure is implied, award 2 marks to the Ordinary Dividend | ||||||
| ORDINARY DIVIDEND | 185400 | -1.0 | MAX MARK 2 | |||||
| e) | Ordinary Dividend per share | 185400 | ||||||
| 800000 | -1.0 | |||||||
| 0.23175 | -1.0 | MAX MARK 2 | ||||||
| f) | Dividend Yield | £0.23 / £1.35 | -1.0 | |||||
| 0.17037037037037037 | -1.0 | MAX MARK 2 | ||||||
| g) | Dividend Cover | (£481,500 - £18,000) | ||||||
| 185400 | -1.0 | MAX MARK 2 | ||||||
| 2.5 times | -1.0 | |||||||
| h) | Earnings per Share | (£481,500 - £18,000) | ||||||
| 800000 | -1.0 | MAX MARK 2 | ||||||
| 0.579375 | -1.0 | |||||||
| i) | Price Earnings ratio | £1.35 / £0.58 | -1.0 | |||||
| 2.33 times | -1.0 | MAX MARK 2 |