FIN621 Financial Statement Analysis Assignment No.2 Solution Fall Semester 2013

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FIN621 Financial Statement Analysis Assignment No.2 Solution Fall Semester 2013


SEMESTER FALL 2012
FINANCIAL STATEMENT ANALYSIS (FIN621)
ASSIGNMENT NO. 02
DUE DATE: 22ND JANUARY 2013
MARKS: 20
LEARNING OBJECTIVES:
After going through this assignment, the students should be able to:

Understand the capital structure of the company.

Understand the calculation of retained earnings

Present the stockholder’s equity section of the Balance sheet after incorporating
changes in the equity.

Calculate the book value per share of the company.
Assignment:
Best Tyres Limited (BTL) - a local tyre manufacturing company famous all over Pakistan for
its tyres used in small vehicles. Its major customers include Cars Company Limited, City
Motors Limited, and Tyre Shop. BTL’s head office is situated in the heart of the Good City,
whereas, it’s manufacturing facilities are located near Port City. .
BTL was incorporated in 2007 with an authorized capital of 1 million ordinary shares of Re.
1 each, and 50,000 9% cumulative preferred shares of Rs. 100 each. BTL has issued all of the
preferred shares at par with the callable price of Rs. 110 each, and 600,000 ordinary shares at
premium of Rs. 15 each. Till 2011, BTL has earned an after tax profit of Rs. 6,920,000 in
cumulative. Since its inception, BTL is paying Paisa fifty per ordinary share as dividend on its
ordinary shares. In 2012, however, the company reported a net loss of Rs. 2,400,000 and
paid no dividend. BTL’s accounting year ends on December 31 each year.
Requirement:
1) Determine BTL’s retained earnings as on December 31, 2012 after taking into
account all dividends till the year 2012.
2) Prepare the stockholder’s equity section for the balance sheet as at December 31,
12012.
3) Calculate the book value per share of the company on the same date.
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