The information below is taken from C Limited’s statement of financial position at 1 September 2021.
5% Debentures (2024) $60000
Equity: Ordinary share capital ($0.50) $240000; General reserve $36000; Retained earnings $22000.
For the year ended 31 August 2022:
A final dividend of $12000 was paid for the year ended 31 August 2021.
An interim dividend of $0.02 per share was paid for the year ended 31 August 2022.
$11000 was transferred to general reserve.
At 31 August 2022 the company proposed a final dividend of $10000 for the year ended 31 August 2022.
Revenue for the year ended 31 August 2022 was $310000 and profit (before debenture interest) was $23000.
(a)[7]
Prepare the statement of changes in equity for the year ended 31 August 2022.
(b)[4]
Calculate the return on capital employed for the year ended 31 August 2022 to two decimal places. (Use closing capital employed.)
(c(i))[2]
Calculate the profit margin for the year to two decimal places.
(c(ii))[2]
Suggest two methods that could be used to improve the profit margin.
(d)[5]
Evaluate both options and advise the company which one to choose. Justify your answer.
Worked solution & mark scheme
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