You are given the following information about two companies:

a You are required to calculate for each company for each year:
i capital gearing ratio;
ii interest cover;
iii dividend cover;
iv proportion of profits paid out as dividends.
b Explain what each shows.
c Comment on the financial performance and position of the two companies making use of appropriate ratios.

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Summarized statements of financial position as at 31 December TimeBall Company DownsPier Company Year 6 Year 7 Year 6 Year 7 000 000 000 000 Total assets 350 402.2 400 354 1 Liabilities and equity Liabilities Current liabilities 9% debentures 150 888 60 100 70 100 140 100 50 200 200 1201 Equity Share capital 100 100 100 115 Share premium 15 Retained profits 100 102.2 100 104.1 Total equity 200 202.2 200 2341 Total liabilities and equity 350 402.2 400 354.1