Exam 6: Ratio Analysis 1: Profitability, Efficiency, and Performance

Azov Limited makes up its financial statements to 30 April every year. Azov Limited has share capital of £4,000,000 made up of 2,000,000 preference shares of £1 each and £2,000,000 of ordinary shares of 50 pence each. The preference shares carry a dividend rate of 5%. Total ordinary and preference dividends of £750,000 were paid out during the year to 30 April 2019. What is the dividend per ordinary share for Azov Limited for the year ended 30 April 2019?

In the financial statements for the year ended 30 June 2019, Marcelo Limited reported revenue of £850,000, operating profit of £221,000, finance income of £34,000 and a taxation charge of £85,000. What is Marcelo Limited's profit before tax % for the financial year ended 30 June 2019?

The market value of one ordinary share in Jermaine plc is 240 pence. The profit for the latest financial year to 30 April 2019 is £17.5m after charging income tax of £4.5m. Jermaine plc has 30m preference shares of £1 each in issue and these preference shares have a dividend rate of 5%. There were 70m ordinary shares in issue throughout the financial year ended 30 April 2019. What is Jermaine plc's P/E ratio?

Ratios must be calculated on a consistent basis in order to generate a valid trend analysis across several years.

Marmora Limited makes up its financial statements to 30 September every year. On 30 November 2018, Marmora Limited paid dividends of £15,000. Profit for the year to 30 September 2019 was £75,000 and a dividend of £30,000 was paid on 28 September 2019. Marmora Limited had 150,000 ordinary shares in issue throughout the financial year to 30 September 2019. What is the dividend per share for Marmora Limited for the year ended 30 September 2019?

For the year ended 30 November 2019, Trample plc has a profit after tax of £5.0m. Issued share capital of £8.0m is made up of six million 50 pence preference shares which carry a dividend rate of 5% and ordinary share capital of £5.0m made up of shares with a par value of 25 pence each. The current market price of one ordinary share in Trample plc is 400 pence. What is Trample plc's price earnings ratio?

Which one of the following statements is a description of dividend yield?

Caspian Limited makes up its financial statements to 30 November every year. During the year to 30 November 2019, Caspian Limited made a profit after taxation of £800,000 and paid a dividend per ordinary share of 2 pence on 31 January 2019 and a further dividend per ordinary share of 4 pence on 30 September 2019. Caspian Limited has an ordinary share capital of £500,000 made up of shares with a par value of 12.5 pence. What is the pay-out ratio for Caspian Limited for the year ended 30 November 2019?

A popular accounting text book sells for £35. Costs of producing each book are £24. Paper and ink costs increase by £1 per book. The marketing manager proposes increasing the selling price of each book to £36. He says: "increasing the cost of each book by £1 covers the increase in costs and maintains the gross profit % on each book."

Rafael Limited has property, plant and equipment of £8.0m, non-current asset investments of £1.5m, and intangible assets of £2.5m at 31 October 2019. In the year ended 31 October 2019, Rafael Limited generated revenue of £34.0m. What is Rafael Limited's non-current asset turnover?

Tiddler Limited has dividends per share of 30 pence, dividend cover of 3 times, 300,000 ordinary shares in issue, 200,000 preference shares of £1 each with a dividend rate of 6% and a taxation charge for the year of £94,000. What is Tiddler Limited's profit for the year?

Xenophon Limited has dividends per share for the financial year of 20 pence, 200,000 ordinary shares with a par value of £1 each, 100,000 preference shares of £1 each with a dividend rate of 10%, profits before taxation for the year of £300,000 and a taxation charge for the year of £50,000. What is Xenophon Limited's dividend cover?

Which one of the following statements is not true?

For the financial year ended 31 August 2019, Jeremies plc has profit before tax of £10.5m, an income tax charge of £2.8m, preference dividends of £0.2m, a total dividend per share for the year of 2.5 pence and 75m ordinary shares in issue throughout the financial year. At 31 August 2019, one ordinary share in Jeremies was valued at 250 pence. Your colleague has calculated a ratio of 4 from the above data. Which ratio has your colleague calculated?

While ratios are a proportion calculated on a consistent basis across different time periods, they fail to overcome the problem of figures changing from year to year.

Propark is a retailer selling clothes to the public from its stores across the country. Shirts sell for £30 each. Each shirt costs Propark £16 to buy from its suppliers. The suppliers reduce the cost of each shirt by £1. Propark passes on this purchase price reduction to its customers and reduces the selling price of shirts in its stores by £1. This reduction in purchase and selling prices will have no effect on the gross profit % generated on the sale of each shirt.

Jorge Limited has current assets of £4.5m and non-current assets of £12.5m. In the year ended 31 December 2019, Jorge Limited generated revenue of £25.5m. What is Jorge Limited's non-current asset turnover?

For the financial year ended 31 December 2019, Jemima Plc has revenue of £28m, cost of sales of £14m, finance income of £0.3m, distribution and selling costs of £3m, finance expense of £2m, income tax of £3m and administration expenses of £2.5m. What is Jemima Plc's operating profit % for the financial year ended 31 December 2019?

For the financial year ended 30 November 2019, Pedro Limited reports revenue of £1,000,000, operating profit of £350,000, finance income of £15,000, finance expense of £50,000 and a taxation charge of £63,000. What is Pedro Limited's profit before tax % for the financial year ended 30 November 2019?

Ratios are an absolute measure.