Summary financial information for SIMOS CO is given below, covering the last two
ID: 2501630 • Letter: S
Question
Summary financial information for SIMOS CO is given below, covering the last two years.
2010 2011
Market Share Price
€1.50
€2.00
Balance Sheets
€
€
€
Fixed Assets
600,000
400,000
Current Assets:
Stock
100,000
100,000
Debtors
80,000
80,000
Cash
20,000
120,000
200,000
300,000
Current Liabilities:
(includes proposed dividends)
(176,000)
24,000
(153,000)
147,000
624,000
547,000
Capital and Reserves
Ordinary €1 shares
560,000
300,000
Preference €1 shares (6%)
50,000
Reserves – P&L a/c
4000
97,000
8% Debentures
60,000
100,000
624,000
547,000
Income Statements:
Sales
1,040,000
698,000
Cost of Sales
728,000
193,000
Gross Profit
312,000
505,000
Expenses
(includes debenture interest)
236,800
405,000
Net Profit Before tax
75,200
100,000
Tax
17,200
23,000
Profit Before Dividends
58,000
77,000
Dividends
- Ordinary
28,000
32,000
- Preference
8,000
Retained Profit
30,000
37,000
Required
Evaluate the company's performance from the viewpoint of the shareholder. Ignore working capital.
Your answer should use appropriate ratios, including ROCE, Operating profit margin, Gearing ratio, interest cover, EPS and PE ratio.
Market Share Price
€1.50
€2.00
Balance Sheets
€
€
€
Fixed Assets
600,000
400,000
Current Assets:
Stock
100,000
100,000
Debtors
80,000
80,000
Cash
20,000
120,000
200,000
300,000
Current Liabilities:
(includes proposed dividends)
(176,000)
24,000
(153,000)
147,000
624,000
547,000
Capital and Reserves
Ordinary €1 shares
560,000
300,000
Preference €1 shares (6%)
50,000
Reserves – P&L a/c
4000
97,000
8% Debentures
60,000
100,000
624,000
547,000
Income Statements:
Sales
1,040,000
698,000
Cost of Sales
728,000
193,000
Gross Profit
312,000
505,000
Expenses
(includes debenture interest)
236,800
405,000
Net Profit Before tax
75,200
100,000
Tax
17,200
23,000
Profit Before Dividends
58,000
77,000
Dividends
- Ordinary
28,000
32,000
- Preference
8,000
Retained Profit
30,000
37,000
Explanation / Answer
ROCE = operating income / capital employed * 100
2010 = 58,000 / 624,000*100 = 9.30%
2011 = 77,000 / 547,000 *100= 14%
Operating profit margin = operating profit / sales * 100
2010 = 58,000 / 1,040,000 = 5.58%
2011 = 77,000 / 698,000 = 11.03%
Gearing ratio = Debenture / (shareholders fund)
2010 = 60000 / 564000 = 0.106
2011 = 100000 / 447000 = 0.224
Interest cover = EBIT / interest
2010 = (236,800+ 4800 ) / 4800 = 50.33
2011 = (405,000+ 8000 )/ 8000 = 51.625
EPS = Earnings available for equity shareholder / number of shareholders
2010 = 30,000/ 560,000 = 0.0536
2011 = 37,000/ 300,000 = 0.123
PE ratio = MPS/ EPS
2010 = €1.50 / 0.0536 = 28
2011 = €2.00 /0.123 = 16.26
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