Join Sarthaks eConnect Today - Largest Online Education Community!
0 votes
6 views
asked in Accounts by (43.9k points)

The following details have been extracted from the financial statements of a company:

Share Capital :Current LiabilitiesRs. 2,00,000
Equity(Rs.10)Rs. 8,00,000Discount on SharesRs. 10,000
12% Preference SharesRs. 2,00,000Fixed AssetsRs. 19,00,000
General ReserveRs. 3,78,000Current AssetsRs. 4,68,000
10% DebenturesRs. 8,00,000

You are required to calculate Return On Investment, Return on Shareholders’ Funds, EPS, Book value per share and P/E ratio if the market price of the share is Rs. 34, the net profit after tax was Rs. 3,00,000, and the tax had amounted to Rs. 1,00,000. 

1 Answer

+1 vote
answered by (46.8k points)
selected by
 
Best answer

Profit before interest and tax = Rs. 3,00,000 + Debenture interest + Tax

 Rs. 3,00,000 + Rs. 80,000 + Rs. 1,00,000 

= Rs.4,80,000

Capital Employed = Equity Share Capital + Preference Share Capital + Reserves + Debentures – Discount on Shares 

= Rs. 8,00,000 + Rs. 2,00,000 + Rs. 3,78,000 + Rs. 8,00,000 – Rs. 10,000 

= Rs. 21,68,000

Return on Investment = (Profit before Interest and Tax/ Capital Employed) × 100 

= (Rs. 4,80,000/Rs. 21,68,000) × 100 

= 22.14%

Return on Shareholders’s Fund = Profit after Tax/ Shareholder’s Fund × 100 

= Rs. 3,00,000/Rs. 13,68,000 × 100 

= 13.84%

EPS = Profit available for equity shareholders/ No. of Equity Shares

 Rs. 2,76,000/ 80,000 = Rs. 3.45

Profit available to equity = Profit after Tax – Preference Dividend shareholders

= Rs. 3,00,000 – Rs. 24,000 = Rs. 2,76,000

P/E Ratio = Market price of a share/ Earnings per share

= 34/3.45 

= 9.855 Times

Book Value per share = Equity Shareholders’ funds / No. of Equity Shares

= Rs. 11,68,000/80,000 shares 

= Rs. 14.6

Related questions

Welcome to Sarthaks eConnect: A unique platform where students can interact with teachers/experts/students to get solutions to their queries. Students (upto class 10+2) preparing for All Government Exams, CBSE Board Exam, ICSE Board Exam, State Board Exam, JEE (Mains+Advance) and NEET can ask questions from any subject and get quick answers by subject teachers/ experts/mentors/students.

One Thought Forever

“There is a close connection between getting up in the world and getting up in the morning.“
– Anon
~~~*****~~~

Categories

...