Class Test: 4 Term: 2 Date: ______________

Name: ___________________________ Grade: XII CAIE

Subject: Accounting Chapter: 31

Maximum Marks: 30 Time Allotted: 1 Hour

1. X plc started its information technology business on 1 January 2022. Its

statement of financial position at 31 December 2022 included the following

balances.

Ordinary share capital ($2 shares) 800 000

Share premium 60 000

Revaluation reserve 70 000

Retained earnings 24 000

5% debenture (2026) 100 000

Bank overdraft 14 000

The following information was also available.

a. The 5% debenture was issued on 1 July 2022.

b. The freehold property was revalued upward by $70000 on 1 August 2022.

c. An interim dividend of $0.12 per share was paid on 1 October 2022.

d. The market price per share at 31 December 2022 was $3.35.

(a) Calculate to two decimal places:

I. price/earnings ratio [5]

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II. dividend yield [1]

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III. gearing ratio [3]

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IV. return on capital employed [3]

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 Additional information

The industry average ratios for 2022 are:

industry average

price/earnings 16

ratio

gearing ratio 25%

(b) Analyse the performance of X plc, comparing the results with the industry

average in respect of:

(i) price/earnings ratio [4]

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(ii) gearing ratio [4]

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Additional information

One of the directors suggests that no final dividend for 2022 should be proposed.

(c) Advise whether or not the directors should propose a final dividend for

2022. Justify your answer. [5]

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