EQUITY IN LIMITED COMPANIES +FINANCIAL STATEMENT ANALYSIS WEEK 5&6

Question 1

how long does a public/private company have before they must submit their accounts

Answer 1

PLC 6 months
LTDs 9 months

Question 2

minimum share capital required for PLCs and LTDs

Answer 2

no minimum for LTDs
50K share capital

Question 3

equity

Answer 3

shares in the company

Question 4

ordinary share capital

Answer 4

capital invested by company owners, with voting rights, more ordinary share capital= more control over company

Question 5

share premium account

Answer 5

treated as equity, shares are issued for the same value but companies can sell it for higher, the extra amount earnt goes to the share premium account

Question 6

general capital reserves

Answer 6

retained earnings moved here for further investment or as a buffer zone for future years

Question 7

bonus issues of shares

Answer 7

extra shares for free for loyal customers etc

Question 8

rights issue of shares

Answer 8

existing shareholders are given the right to buy shares at a lower price

Question 9

ratio analysis

Answer 9

used to make comparisons with earlier years

Question 10

profitability ratio types

Answer 10

gross profit
operating profit
return on capital
employed

Question 11

gross profit margin equation

Answer 11

gross profit/sales rev x100

Question 12

operating profit equation

Answer 12

operating profit/sales rev x100
reflects degree of competitiveness

Question 13

operating profit

Answer 13

gross profit-expenses

Question 14

return on capital equation

Answer 14

operating profit/equity+non current liabilities (investment etc) x100

Question 15

ratio analysis in relation to liquidity

Answer 15

current ratio
acid test

Question 16

current ratio equation

Answer 16

current assets/current liabilities

Question 17

acid test equation

Answer 17

current assets-inventory/current liabilities

Question 18

ratio analysis in relation to efficiency

Answer 18

trade receivable settlement period
inventory holding period
trade payable settlement period

Question 19

trade receivable settlement period equation

Answer 19

trade receivable/sales rev x365

Question 20

inventory holding period

Answer 20

inventory/cost of salesx365

Question 21

trade payable settlement period equation

Answer 21

trade payables/cost of sales x365

Question 22

ratio analysis with gearing

Answer 22

gearing
interest cover

Question 23

interest cover equation

Answer 23

operating profit/interest expense

Question 24

gearing equation

Answer 24

non current liabilities/equity+non current liabilities x100