|
|||
Study the information given below and write a report to a group of potential shareholders who are interested in buying shares in the company. Use the questions given as a guide for the subheadings that you must address in your report. You must make sure that you give the potential shareholders enough information so that they understand what the indicators are testing.
INFORMATION:
You are provided with information extracted from the published Income Statement of ZEN Ltd, a public company, together with the ratios and percentages calculated from the financial statements:
THE FOLLOWING FIGURES WERE EXTRACTED FROM THE FINANCIAL STATEMENTS ON 31 OCTOBER 2021 2021 2020
R’000 R’000
Sales 1 370 000 1 400 000
Gross Profit 650 000 650 000
Interest on borrowed money 68 000 49 000
Depreciation 30 000 31 000
Director’s Fees 28 000 20 000
Audit Fees 16 000 15 000
Net income before tax 140 000 180 000
Taxation 65 000 81 125
Retained income at the beginning of the year 51 375 25 000
Net Profit after tax 75 000 98 875
Ordinary Share Dividends 64 000 72 500 Retained income at the end of the year 62 375 51 375
ADDITIONAL INFORMATION 2021 2020
Number of directors 3 2
FINANCIAL INDICATORS, RATIOS AND PERCENTAGES CALCULATED FROM THE FINANCIAL STATEMENTS 2021 2020
Real Mark-up % 125 % 125 %
Net income before tax on turnover 10 % 12 %
Net income after tax on turnover 5 % 7 %
Interest on borrowed money 15 % 13 %
Interest on investments 10 % 8%
Return on capital employed 9 % 13 %
Earnings per share 47 cents 67 cents
Dividend per share 40 cents 60 cents
Initial issue price per share 500 cents 500 cents
Net asset value per share 545 cents 535 cents
Market Price 490 cents 510 cents
Return on shareholders’ equity 7 % 12 %
Debt Equity Ratio 0,9 : 1 0,4 : 1
Solvency Ratio 2.3 : 1 2,8 : 1
Current Ratio 1,4 : 1 2,1 : 1
Acid Test Ratio 0,4 : 1 0,8 : 1
Period for which enough stock is hand 50 days 60 days
Debtors average collection period 40 days 30 days
Creditors average payment period 28 days 30 days
effectiveness of the directors in regard to their control of the company’s operations?
Explain. You may have to do additional calculations in order to answer properly. Have
the operating expenses increased in your opinion? Show a calculation.
as soon as possible. As the bank manager, would you grant the additional overdraft? Quote one additional financial indicator other than the ones discussed under financial gearing.
Your answer must focus on the financial indicators which are of specific relevance to a
shareholder. Return to Shareholders
In your answers you must quote the relevant indicator.
Compare the indicator – last year to this year.
Identify the problem areas. Make suggestions on how to improve the situation.
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.
Read moreEach paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.
Read moreThanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.
Read moreYour email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.
Read moreBy sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.
Read more