Question 9

As a newly employed Accountant of Peace Limited, you have been presented with the financial statements as follows:

Statement of Comprehensive Income for the year ended 31st December 2017 2016
GHC GHC
Net Turnover Cost of Sales Gross Profit General, Admin and Selling Expenses Operating profit Debenture Interest Expenses Investment Income Profit before tax Corporate Tax Profit after tax Statement of income surplus Balance b/f Net Profit Dividend: Preference Shares Ordinary Shares		456,500 (295,000) 161,500 (109,500) 52,000 (14,500) 5,000 42,500 (12,500) 30,000 149,500 30,000 179,500 (10,000) (12,000) 157,500		420,000 (227,000) 193,000 (93,000) 100,000 (3,000) 4,500 101,500 (15,000) 86,500 89,500 86,500 176,000 (9,000) (17,500) 149,500
Statement of Financial Position as at 31st December:
2017 2016
GHC GHC
Assets Goodwill Tangible Fixed Assets Inventories Accounts Receivable Bank and Cash on hand Liabilities: Accounts Payable Accruals Debentures Stated Capital Preference Shares Ordinary Shares Income Surplus	10,000 106,000 147,000 80,000 26,000 369,000 37,500 25,500 58,500 40,000 50,000 157,500 369,000		5,000 132,000 118,500 24,000 28,500 308,000 26,500 20,000 37,000 25,000 50,000 149,500 308,000

Required:

a) Compute for the two years the following ratios:

i. Return on Capital Employed

ii. Fixed Asset Turnover

iii. Current ratio

iv. Debt/Equity Ratio

v. Interest Cover

(b) Write a report to the Finance Director commenting on the financial performance of the company.