The latest accounts of Rhys Ltd are outlined below: Balance Sheet at 30 June 1998 () (000s) () (000s) () (000s) Fixed assets Land and buildings 320 Plant and machinery 240 Vehicles 120 680 Current assets Stock 230 Debtors 215 Bank and cash 122 567 Current liabilities Creditors 126 Long-term loans Proposed dividend 44 170 397 1077 200 877 Balance Sheet at 30 June 1998 Financed by: Share capital 8% 1 preference shares Ordinary shares 25p Reserves: () (000s) (2) (000s) () (000s) Profit and loss account for the year ended 30 June 200 400 277 877 1998 Sales 998 Less cost of sales 598 Gross profit 400 Less distribution costs 150 Administration expenses 70 220 Net operating profit 180 Less interest Less tax 20 160 67 93 Less dividends Interim paid Preference 4 Ordinary 24 Proposed Preference 4 Ordinary 40

(i) What is the difference between expenses and appropriations? (ii) Which of the following would be considered to be appropriations and which expenses? - Depreciation - Preference dividends - Directors fees - Provision for doubtful debts - Interest on loans - Transfer to reserves (iii) What is the difference between provisions and reserves? (iv) What rate of dividend has Rhys Ltd declared per ordinary share as an interim dividend and as a final dividend? (v) What is the value of year end equity in the balance sheet of Rhys Ltd? (vi) Calculate the following ratios: - Working capital ratio - Acid test -Net operating profit to sales - Return on year end equity - Ratio of long-term debt to total long-term finance

(vii) If the ratios for a close and successful competitor for the same period were as indicated below, comment on each of the ratios obtained in (vi) above and summarize any overall advice you would give Rhys Ltd. Working Capital ratio Acid Test Net operating profit to sales Return on year end equity 2:1 0.8: 1 20% 16% Ratio of long-term debt to total long-term finance 40%