The formula to calculate trade payables payment period is as follows:
Trade payables payment period =Trade Payables / Credit Purchase x 365
There is no information in the balance sheet and the income statement of Jameson plc that the company made a credit purchase in 2009 and 2010 fiscal year.
Dividend yield
Dividend yield reveals the cash returns attributed to a share and to its current market value. The dividend yield assists investors to assess the cash return on investment.
Formula:
Dividend Yield: Annual Dividend per Share / Price per Share
2009 = 26.25/850
2009=3.09%
2010=29.25/958
2010=3.05%
Price/earnings ratio
P/E Ratio relates the market value of a share and relates to its earning per share. It is calculated as:
P/E Ratio= Market Value per Share / Earning per share
2009= 850/26.25
2009=32.38
2010=958/29.25
2010=32.75
Summary of Ratio of Jameson plc is revealed in Table 1.
Table 1: Ratio Analysis of Jameson Plc
Ratio
2009
2010
Current Ratio
2.63
2.92
Acid Test
2.2
2.53
ROCE
18.75%
20.01%
Gross Profit Margin
49.9%
50.7%
Operating Profit Margin
12.28%
12.74%
Inventory Holding Period
52.53
53.03
Trade receivables collection period
0
0
Trade payables payment period
Nil
Nil
Dividend Yield
3.09%
3.05%
Price/earnings ratio
32.38
32.75
Answer to Question 3
Portable bikes -- 2 - go
Costs
Fixed costs
£50,000 per annum
To produce between 1,000 and 3,000 bikes
Variable cost per portable bicycle
£40 per unit
a.
Sales
3,000 x £76.66
230,000
Fixed Costs
£50,000
Variable Costs
40 x 3,000
£120, 000
Total Costs
£170,000
Profit
230,000-170,00
£60,000
To make the profit of £60,000 from the demand of 3,000, the company will need to charge £67.66 as the selling price per portable bike.
B. To charge £80...
The company should charge £115 to maintain its £60,000 profits.
D.
Portable bikes -- 2 - go
Costs
Fixed costs
£40,000
Variable cost per portable bicycle
£35 x2,500
£87,500
Outsource Suitcase
£10 x 2,500
£25,000
Total Costs
£152,000
It is advisable to the company to outsource suitcase production at £10 per case. By doing so, the company will be able to decline the total costs of production from £170,000 to £152,000.
E. The best strategy for the company to maximize profits is to try as much as possible to decline the fixed costs and variable costs. The company should implement efficient strategy to decline the number of machine hours to produce a bike. Moreover, the company should outsource many of its non-core business operations to decline costs in order to maximize profits.
Answer to Question 4:
The company present value is as follows:
Machine Costs
400,000
420,000
620,000
Redundancy Payment s
150,000
Worth of the Factory
470,000
The cash flow at end of 4 years will be £22, 8212.48. It is advisable for the company to lease the factory.
B. It is better to lease the factory because the net present value will be ($584,966.82) and PV of Expected Cash flows is $145,033.16 revealing that the company may not be able to generate returns at end of the 4 years operations. Based on the cash flow, the present value detail is revealed as follows:
Present Value = $145,033.16
Cash Flow Stream Detail
Period
Cash Flow
Present Value
1
160,000.00
142,857.14
2
-40,000.00
-31,887.76
3
30,000.00
21,353.41
4
20,000.00
12,710.36
Total:
145,033.16
List of Reference
IAF-October 2011 Attachment
