22.5 The following statistics relate to a company:

%

%

Equity capital employed:

Fixed assets 20 Ordinary share capital 10 Stock 30 Share premium account 5

Debtors 30 Retained earnings 25 Cash 20 40

*

Debentures 20

*

Current liabilities 40 100 100 Debenture interest

= £40,000 Stock turnover

= 6*

Debtors’ turnover

= 5** (75% of sales are made on credit)

Return on capital employed

= 8%f Earnings per share

= 18p Number of shares in existence = 1,000,000 Tax rate =50% of pre-tax profits

* Calculated on year-end stock.

** Calculated on year-end debtors.

f Defined as profit before interest and tax h- equity capital employed.

Required:

Draft the balance sheet and the profit and loss account of the company, inserting as neces sary a balancing figure for expenses other than purchases.