Please complete all questions and show all workings. Thank you,Regards. Marque

Question

Robert · Accepted Answer

Solution 1.1: 
Data file: 
  2011 2010 
Revenue 2065 1788.7 
Cost of sales 1478.6 1304 
Gross profit 586.4 484.7 
Current Assets 572.3 532.2 
Inventory 119 109 
Receivables 400.9 347.4 
Trade receivables 329.8 285.4 
Other receivables 71.1 62 
Cash at bank and in hand 52.4 66.8 
Creditors falling due within one year 501 420.3 
Bank overdraft 49.1 35.3 
Taxes 62 46.7 
Payables 389.9 338.3 
Trade payables 236.2 210.8 
Net current assets 71.3 102.9
Liquidity ratio is the ratio which helps in analyzing the firm’s ability to meet short term 
obligations. For analyzing the liquidity ratios, two major ratios are used i.e. current ratio and 
quick ratio. 
Calculating the liquidity ratios: 
Current ratio: 
               
              
                   
 
Current Liabilities = Creditors falling due within one year + Bank overdraft + Payables 
Currents Assets (as given) 
 2011 2010 
Current Assets 572.3 532.2 
Current Liabilities 940.0 793.90
              (    )   
      
     
      
              (    )   
     
      
      
Quick ratio: 
             
                        
                   
 
            (    )   
           
   
      
            (    )   
           
      

Working capital :
Solution 1.2: 
Additional fund = 126000 
Current market price = 1.80 
Ordinary shares = 200000 
Par value = 1 
Calculating number of shares 
Right price Number of new shares (126000 / right price) 
1.6 126000/1.6 = 78750 
1.5 126000/1.5 = 84000 
1.4 126000/1.4 = 90000 
1.2 126000/1.2 = 105000
Earnings before the rights issue are £300,000 x 20% = £60,000 
This gives an earnings per share of £60,000/200,000 shares = 30p 
The earnings after the rights issue will be (£300,000 + £126,000) x 20% = £85,200 
Right price No. of shares Total shares EPS Dilution 
 (126000/right 
price) 
(New+200000) (85200/Total 
number of 
shares) 
Vs 30p 
1.6 78750 278750 30.6 0.6 
1.

Please complete all questions and show all workings. Thank you,Regards. Marque

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