Ask Question, Ask an Expert


Ask Financial Accounting Expert

You are presented with the given information for three quite separate and independent companies:

1119_balance sheet.jpg

Additional information:

1) The operating profit before interest and tax for the year to 31 March 2008 earned by each of the three companies were Rs 300,000.

2) The efficient rate of corporation for the year to 31 March 2008 is 30%. This rate is to be employed in computing each company’s tax payable on ordinary profit.

3) An ordinary dividend of Rs0.20 for the year to 31 March 2008 is proposed by all the three companies, and any preference dividends are to be given for.

4) The market prices per ordinary share at 31 March 2008 were as shown below:                                                         

Tom plc                                           8.40
Dic plc                                             9.50
Harry plc                                        10.38

5) There were no changes in the share capital structure or in long-term loans of any of the companies throughout the year to 31 March 2008.


a) Insofar as the information permits, make the profit and loss account for each of the three companies (in columnar format) for the year to 31 March 2008 (formal notes to accounts are not needed).

b) Compute the given accounting ratios for each company:

i) Earnings per share
ii) Price earnings
iii) Gearings (taken as total borrowings (preference share capital and long-term loans) to ordinary shareholders’ funds)

c) By using the gearing ratios computed in answering part (b) of the problem, in brief examine the significance of gearing if you were thinking of investing in some ordinary shares in one of the three companies supposing that the profits of the three companies were fluctuating.

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M96939

Have any Question? 

Related Questions in Financial Accounting

Alomar co a consolidated enterprise conducted an impairment

Alomar Co., a consolidated enterprise, conducted an impairment review for each of its reporting units. In its qualitative assessment, one particular reporting unit, Sellers, emerged as a candidate for possible goodwill i ...

Nbspon the internet and in the news you see many articles

On the internet and in the news you see many articles on non-profit companies and their contribution rates. For example, let us say that a firm returns 20% of its contributions to research and pays its CEO $700,000 per y ...

You are a student preparing for a job interview with a

You are a student preparing for a job interview with a Fortune 100 consumer products manufacturer. You are applying for a job in the Finance Department. This company is known for its rigorous case-based interview process ...

Bed amp bath a retailing company has two departments

Bed & Bath, a retailing company, has two departments, Hardware and Linens. The company’s most recent monthly contribution format income statement follows: Total Hardware Linens Sales $ 4,160,000 $ 3,060,000 $ 1,100,000 V ...

Bourne guitars a corporation reported a 157000 net sect1231

Bourne Guitars, a corporation, reported a $157,000 net §1231 gain for year 6 1) Assuming Bourne reported $50,000 of nonrecaptured net §1231 losses during years 1–5, what amount of Bourne’s net §1231 gain for year 6, if a ...

Lupe a cash basis taxpayer owns 55 of the stock of jasper

Lupe, a cash basis taxpayer, owns 55% of the stock of Jasper Corporation, a calendar year accrual basis C Corporation. On December 31, 2014, Jasper accrues a performance bonus of $100,000 to Lupe that it pays to him on J ...

1 for its inspecting cost pool noah company expected

1. For its inspecting cost pool, Noah Company expected overhead cost of $69,822 and 1,178 inspections. The actual overhead cost for that cost pool was $57,797 for 1,870 inspections. The total cost that would be assigned ...

The chocolate candy factoryrsquos process cost

The Chocolate Candy Factory’s Process Cost Accounting Determine the general journal entry for each of the following transactions. Use the following accounts from the manufacturing accounting system, plus use any other ac ...

Alpha car rental purchased 5 cars for a total of 100000

Alpha Car Rental purchased 5 cars for a total of $100,000 three years ago. Now it is replacing the cars with newer vehicles. The company has depreciated 92.59% of the old cars, and sold these cars for a total of $ 25,000 ...

Miller model companies u and l are identical in every

Miller Model Companies U and L are identical in every respect except that U is unlevered while L has $16 million of 8% bonds outstanding. Both firms have an EBIT of $2 million. Assume that all of the MM assumptions are m ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate