Balance Sheet of A Ltd

(a) What is the par value of (i) the ordinary share, and (ii) the preference share?

(b) What dividend will the preference shareholder receive? Ar e the preference shares 'cumulative'?

(c) Wha t is the book value of each ordinary share, assuming that the preference shareholder is entitled to a return of capital only?

(d) Why might the par value, book value and market value of the ordinary shares be different?

(e) If the ordinary shareholders normally received a dividend of 10 per cent and sought a yield of 12 per cent, what would be the market price?

(f) Wha t interest would be paid to the debenture holders? Explain whether this is an expense or an appropriation of profit.

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1 ordinary shares 8% 1 preference shares Share premium Undistributed profit 20,000 Fixed assets 49,000 12,000 2,000 8,000 10,000 Current assets 14,000 7,000 General reserve 5% Debentures Current liabilities 4,000 63,000 63,000