Name: Registration No:

1. Statement of financial position of Qavi & Co:

Rs. 000
Non-current assets 25
Current assets 15
Total Assets 40
Equity and Liabilities
Ordinary share capital 15
Ordinary share premium 5
Preference share capital (irredeemable) 2
Reserves 5
Non-current liabilities
10% bonds 5
Current liabilities
Trade creditors 5
Bank overdraft 3
Total equity and liabilities 40
Profit and loss Statement
Operating profit (PBIT) 5.0
Finance charges (1.5)
Profit before tax (PBT) 3.5
Tax 30% (1.05)
Net Profit 2.45
Required:
a) Calculate the interest cover, and the capital gearing ratio (on the assumption that
overdraft is to be used in the long-term so should be included in long-term debt)
b) Explain the concept of earnings
c) Explain Investors ratios vs. Lenders ratios