Condensed statement of financial position and income statement data for Clarence Limited appear below.

Additional information:
1. The market price of Clarence’s ordinary shares was £4.00, £5.00, and £7.00 for 2018, 2019, and 2020, respectively.
2. All dividends were paid in cash.

Instructions
a. Compute the following ratios for 2019 and 2020.
1. Profit margin.
2. Asset turnover.
3. Earnings per share. (Weighted-average ordinary shares in 2020 were 32,000 and in 2019 were 31,000.)
4. Price-earnings ratio.
5. Payout ratio.
6. Debt to assets ratio.
b. Based on the ratios calculated, discuss briefly the improvement or lack thereof in financial position and operating results from 2019 to 2020 of Clarence Limited.

Transcribed Image Text:

Clarence Limited Statements of Financial Position December 31 2020 2019 2018 Plant and equipment (net) £370,000 £400,000 £358,000 Investments 75,000 70,000 45,000 Other current assets 90,000 95,000 64,000 48,000 18,000 Accounts receivable (net) 50,000 45,000 Cash 25,000 20,000 £640,000 £600,000 £533,000 Share capital-ordinary, £10 par Retained earnings £315,000 £345,000 £300,000 113,000 145,000 123,000 80,000 70,000 Non-current liabilities 87,000 75,000 50,000 70,000 Current liabilities £640,000 £600,000 £533,000 Clarence Limited Income Statement For the Years Ended December 31 2020 2019 Sales revenue £740,000 £700,000 Less: Sales returns and allowances 40,000 60,000 Net sales 700,000 640,000 Cost of goods sold 420,000 400,000 Gross profit Operating expenses (including income taxes) 280,000 240,000 236,000 210,000 Net income £ 44,000 £ 30,000