Question

Building Beginning inventory Mortgage bond Advertising Inventory Ordinary shares Sales Interest expense Interest received Fuel Long-term business loan Stationery Retained earnings Electricity and water Purchases Depreciation Ending inventory Accounts receivable Maintenance Telephone Cash Salaries and wages Insurance Vehicles CL Accounts payable 5,400,000 300,000 3,600,000 -420,000 900,000 1,350,000 4,500,000 210,000 13,000 78,000 1,500,000 15,600 1,400,000 191,000 -2,250,000 160,000 900,000 1,800,000 65,000 35,500 168,000 900,000 88,000 -380,000 798,000 Now, using the given set of figures, draw up a balance sheet and income statement for the

Answer 1

The Balance Sheet and Income Statement are as follows:

Income Statement for the period ended.... 4,500,000 13,000 4,513,000 Revenue from Operations Other Income Interest Received) Total revenue - (0) Expenses Purchases Change in inventories (Opening Less Closing) Salaries and wages Electricity and Water Expense Advertising Fuel Stationery Maintenance Telephone Insurance 2,250,000 -600,000 900,000 191,000 420,000 78,000 15,600 65,000 35,500 88,000 3,355,100 Total expenses - (II) Earnings before interest, tax, depreciation and amortization (EBITDA) (0) - (11) Depreciation and amortization expense Finance costs Profit/(loss) before exceptional items & tax Exceptional items Loss on sale of asset (net) [e-scooter] Profit/(loss) for the period 1,157,900 160,000 210,000 787,900 787,900 Balance Sheet as on..... EQUITY AND LIABILITIES Shareholders' Funds Share Capital Retained Earnings 1,350,000 1,400,000 1,500,000 3,600,000 Non Current Liabilities Long term Borrowings Mortgage Bond Current liabilities Short Teri Borrowings Trade payables Other current liabilities TOTAL 798,000 8,648,000

ASSETS Non Current assets Property, Plant & Equipment Tangible assets Building Vehicles Intangible Assets Intangible assets under development Long-term loans and advances 5,400,000 380,000 Current assets Inventories Trade Receivables Cash and bank balances Short-term loans and advances Other Current Assets TOTAL 900,000 1,800,000 168,000 8,648,000 Notes: Current Period Profits are assumed to be already included in the Retained Earnings

The EPS can be calculated as follows

Earnings available for Equity shareholders divided by number of shares

787900/135000 = 5.83 per share

Earnings yield for the year

Earnings / Investment = 787900 / (135000 x 25) = (787900 / 3375000) X 100= 23.35 %

The earnings yield is greater than the target of 15% hence investment should be made.