Gearing and Capital Structure

The net & loss statement of Biro Co is given belowRevenue 15,000Cost of Sales (3,000) uncouth profit 12,000Expenses (2,500)Profit before interest & tax 9,500Interest (2,200)Tax (1,300)Net Profit 6,000If 15%Expenses & 50% Cost of sales are variable costs.What is the operational string of Biro Co. nearest dickens decimal places using (Contribution PBIT)? (FIB)95256604000(2 marks)Q2. Hutt Co. has a debt of $200m with equity of $400m. The new investors are confused on the gearing direct of Hutt Co. If the investors use debt to debt plus equity method which stage of gearing level is Hutt Co at? (MCQ)UngearedNormal accommodateHighly GearedLow Geared(2 marks)Q3. What get out be the effect on the financial risk of a bay window if the interest covers are as follows? (HA)Interest Cover is 6.5 times HIGH LOWInterest Cover is 3 times HIGH LOW(2 marks)Q4.The ordinary shares of a company grow a face value of $0.3/share & are surely traded on the market for $5/share. The bonds have a fac e value of $100 and currently, trade at $110. The preference shares have a face value of $1 and currently, trade at 60 cents. What is the market value based gearing of the company, defined as prior charge capital/equity using the following information self-aggrandising an answer to the nearest %? (FIB)$000 $000Equity Reserves 10,000 Ordinary Shares 4,200 14,200Non-current liabilities Bank loans 5,100 Bonds 3,500 Preference shares 6,000 14,600Current Liabilities Overdraft 2,000 Payables 3,200 5,20034,000-2032014541500(2 marks)Q5.Which of the following ratios relate to either pecuniary Risk or Business Risk?(HA)(Debt/Equity) 100 pecuniary BUSINESS(PBIT/Interest)FINANCIAL BUSINESS(Fixed Cost/Variable Cost)FINANCIAL BUSINESS(2 marks)Q6.At 15th December 2011, a marketing agency declares an interim ordinary dividend of 9.3c/share and a final ordinary dividend of 10.2c/share. Assuming an ex-div share price of 612c, what is the dividend yield? (MCQ)1.52%1.67%3.19%3.74%(2 marks)Q7. A com pany has $205m assets and has liabilities of $70m. Current liabilities let up 20% of the total liabilities. The company has a profit after tax of $130 and the corporation tax in the market is 25%. The company has no interest paying loans.What is the return on capital employed? (MCQ)63%68%79%85%(2 marks)Q8. A group of shareholders was expecting an overall bad go for dividends but when the results were announced the results were not as bad as it was expected by the shareholders. This would probably have the following impact (HA)Dividend Yield INCREASE UN-EFFECTED DECREASEPrice/ Earnings ratio INCREASE UN-EFFECTED DECREASE (2 marks)Q9. Warden Co. has a current share price of $8.5/share which was previously $4.7/share. The company paid a dividend of $2.6/share.What return would the shareholders likely to be given on their investment? (FIB)400055461000(2 marks)Q10. Which of the following statement relates to the ratios given below? (P&D)It provides a basic measure of the company perfor mance This is the basic measure of a companys performance from an ordinary shareholders point of view An interpretation of the effect on shareholders wealth RETURN OF SHAREHOLDERS PRICE/EARNINGS RATIO EARNINGS PER SHARE(2 marks)GEARING AND CAPITAL complex body part (ANSWERS)Q1. 1.38Cost of sales = 3,000 50% = 1,500Expenses = 2,500 15% = 375Total variable cost = 1,875Contribution = 15,000 1,875 = 13,125Operational Gearing = 13,125 9,500 = 1.38 Q2. DGearing = 200 (400+200) 100 = 33.33%Ungeared (0%), Normal Geared (=50%), Highly Geared (50%) & Low Geared (