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Ushindi limited presented the following financial statements on 30 June
2010: Income statement for the year ended 30 June 2010 Sh. Sales (all on credit) 4,000,000 Operating profit 440,000 Less: debenture interest 40,000 400,000 Corporation tax 176,000 224,000 Ordinary dividends proposed 107,200 Retained profit 116,800
Balance sheet as at 30 June 2010
Sh. Sh. Sh. Fixed assets: Freehold property (net book 480,0 value) 00 Plant and machinery (net 800,0 book value) 00 Motor vehicle (net book 200,0 value) 00 Furniture and fittings 200,0 00 1,680,0 00 Current assets: Stock 1,000,00 0 Debtors 400,00 0 Investments 120,00 0 1,520,00 0 Current liabilities: Trade creditors 238,40 0 Bank overdraft 878,40 0 Corporation tax 176,40 0 Dividend payable 107,20 (1,400,0 120,0 0 00) 00 1,800,0 00 Sh. Sh. Financed by: Authorised share 800,00 capital:800,000 sh.1 0 ordinary shares Issued and fully paid: 400,00 400,000 sh.1 ordinary shares 0 Capital reserve 200,00 0 Revenue reserve 800,00 0 Loan capital: 400,000 sh.1 400,00 10% debentures 0 1,800,0 00 Additional information: 1. An analysis of the industry in which the company operates reveals the following industrial averages: Current ratio 1:5:1 Quick ratio 0:8:1 2. The purchase for the year were sh.2,160,000 while the cost of sales was sh.3,000,000. 3. The market price of the company’s share as at 30 June 2004 was sh.5
Required a) Compute the following ratios for Ushindi Limited: i) Return on capital employed ii) Turnover of capital iii) Operating expenses ratio iv) Accounts receivable turnover in days v) Dividend yield vi) Price earnings ratio vii) Market value to book value ratio. viii) Current ratio.
b) Compare the company’s liquidity performance with that of the
