practising for exams, so looking forward to what you have in-store to help.

1. The directors of Atono pic were informed at a golf outing by fellow directors that it is more valuable to have debt in a company's capital structure than equity, as debt is cheaper than equity. Atono pic currently has no debt in its capital structure, though is considering borrowing funds, which it will use to buy back the more expensive equity capital. The capital structure of Atono pic is as follows: Current Suggested E'000 E'000 Assets 51,000 51,000 Equity and reserves 51,000 27,000 Long-term debt 24,000 Total equity and liabilities 51,000 51,000 Shares outstanding 1,700,000 900,000 Additional information: 1. The company's equity shares have a nominal value of $30 each and are currently trading at par and it is assumed that this value does not change when the suggested capital structure change takes place. 2. The long-term debt attracts an interest rate of 6 per cent. 3. Taxation is 20 per cent. Required: Calculate the gearing ratio for Atono plc under both scenarios. 2. The following are the sun financial statements of Ingrid Lid and Epona Lid, two firms that operate in i Summarised statements of profit and loss ngrid Lid Epora Lid Sales revenue E 000 7,800 Cost of goods sold (4 760 Gross profit 1,840 1.984 Overhead expen (including interest) (1,340) (1,460 Profit for the year 500 ments of financial position ASSETS Non-current assets 780 1.440 Current assets Inventories 400 2,000 Trade receivables 1.400 Bank 390 2.710 3.400 Total assets 3.490 4,840 EQUITY AND LIABILITIES Equity Share capital and retained earnings 1,770 2.600 Non-current liabil 8% long-term loan 700 Current liabilities Trade payables 1,020 1.240 Bank overdraft Total current 1,020 Total liabilities 1,720 2,240 Total equity and liabilities 3.490 Note: The rate of interest on Epona's overdraft is 10 per cent per annum. Required: a. Calculate four ratios for each company showing profitability and five showing liquidity. (Use 365 days a year. Round your trade receivable days and credit period ratio answers to 1 decimal place, and all other answers to 2 decimal plac A