Chapter 13: Capital structure and financial ratios

Part 1. Hashimi plc has the following summarised statement of financial position:

At the date of the statement the shares are quoted at $2.20 each and the debentures at 95 per $100 nominal. Calculate the gearing ratio, debt / (debt + equity), using (a) book values and (b) market values.

Part 2. A company's results for the year to 31 December 2002: profit before interest and tax $52,000; interest $6,000 (6% debentures, $100,000 nominal, quoted at $110 per $100); profit before tax $46,000; tax $12,000; profit after tax $34,000; preference dividends $2,800 (7% $1 preference shares, $40,000); ordinary dividends $20,000. Ordinary share capital is $60,000 in 10c shares, quoted at $0.83 at 31 December 2002. Calculate the interest cover, earnings per share, dividend cover, dividend yield and price/earnings ratio.

Part 3. (i) XYZ plc's share price was $4.80 on 1 January 2015; a dividend of $0.20 per share was paid during the year and the price at the end of the year was $5.10. (ii) PQR plc's share price was $6.50 on 1 January 2015; a dividend of $0.50 was paid and the year-end price was $6.40. Calculate each company's total shareholder return for the year.