# Calculation of Ratios and Analysis of Accounting Practices

10 Pages1773 Words55 Views
|
|
|
Accounting practices
Accounting for managers 1
Question 1 (A)
Calculation of Ratios
Return on Assets
ROA: Net Income/ Average total assets
\$4,362 / \$28,990 = 15%
Average total assets = Opening Assets + Closing Assets
2
(\$29935+\$28045)/2 = \$28,990
Industry Average = 22%
Return on Equity
Net income for equity
shareholders
\$4,312
Shareholder’s Equity \$13,715
ROE 31%
ROE: Net income for equity shareholders/ Shareholder’s equity
(\$4362-\$50) / (\$7200+\$6515) = 31%
Net income available to equity shareholders = Net income – Preference share dividend
Shareholder’s equity= equity share capital + retained earnings
Industry Average = 20%
Profit Margin Ratio
Net income \$4,362
Average total assets \$28,990
ROA 15%
Accounting for managers 2
Net income \$4,362
Net Sales \$55,000
Profit Margin 8%
Profit Margin = Net income/ Net sales
\$4,362 / \$55,000 = 8%
Industry Average= 4%
Earnings per Share
Net profit for equity
shareholders
\$4,312
Number of Equity
Shareholders
\$7,200
EPS 0.60 or 60 cents
EPS = Profit for equity shareholders/ No. of Equity Shareholders
\$4,312 / \$7,200 = 0.60
Industry Average= 45 cents
Price Earnings Ratio
Market price per share \$12
Earnings per share \$0.60
P/E Ratio 20
Price Earning: MPS / EPS
\$12 / \$0.60 = 20
Industry Average= 12
Dividend Yield Ratio

## End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents

### Support

#### +1 306 205-2269

Chat with our experts. we are online and ready to help.