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Financial Accounting Case Study
Title: Financial Accounting Case Study
Category: History / European History
Details: Words: 1116 | Pages: 4.7 (approximately 235 words/page)
Financial Accounting Case Study
Analysis and Comment on Highlow Engineering
Profitability
Commenting on Highlow Engineering's profitability and referring initially to the primary measure of Return on Capital employed (ROCE) we can see that the return is good (possibly a little low) but does improve from 2002 to 2003.
Gross profit at 33.0 % in 2003 is excellent and shows a healthy year on year increase from 2001 onwards.
Overheads remain steady at around 17 % throughout the period (though there is a slight improvement between 2002 and 2003.
Distribution …showed first 75 words of 1116 total…
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…showed last 75 words of 1116 total…surplus of 1.5 Million STG
Therefore Grandfather is entitled to 5 % Net Assets plus surplus
= (26,796 +1,500) x 0.05 = 1414.8 or 1,414,800 STG
c.<Tab/>Price Earnings basis appropriate to Highlow engineering as a Private Company.
Earnings after Tax '000's = 4,180 - 27 (Preference Dividend) = 4,153
P/E ratio of similar company would be 18 X, however this is a Private Company which means we reduce by 25 % and use 13.5 as the applicable P/E ratio.
Therefore 4,153 X 13.5 = 56,065.5
Therefore Grandad owns 0.05 % of 56,065.5 = 2,803.25 or 2,803,250 STG
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