Accounting 9706 · AS & A Level · Analysis and communication of accounting information

Analysis and communication of accounting information — practice question

Alpha plc and Beta plc operate in the same industry. Their annual sales revenue is identical, and neither company has any preference shares in issue.
(a(i))[2]

Calculate for Alpha plc: Profit margin.

(a(ii))[2]

Calculate for Alpha plc: Income gearing.

(a(iii))[2]

Calculate for Alpha plc: Earnings per share.

(a(iv))[2]

Calculate for Alpha plc: Price earnings ratio.

(a(v))[2]

Calculate for Alpha plc: Dividend yield.

(a(vi))[2]

Calculate for Alpha plc: Total dividend paid.

(a(vii))[2]

Calculate for Alpha plc: Dividend cover.

(b)[6]

Suggest one reason for the difference between the two companies for each of the following: (i) Profit margin, (ii) Income gearing, (iii) Earnings per share, (iv) Price earnings ratio, (v) Dividend yield, (vi) Market value of one share.

(c)[5]

Suggest, with reasons, in which company Amit should invest.

Worked solution & mark scheme

This 25-mark question has a full step-by-step worked solution and mark scheme. One marking point: Profit for the year is $160 000

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