Interpretation of Accounts The following figures have been taken from the Final Accounts of Watson plc, a manufacturer in the construction industry for the year ended 31/12/2008 - Leaving Cert Accounting - Question 5 - 2009

Return on Capital Employed (ROCE) can be calculated with the formula:

$ROCE = \frac{Net\ Profit + Debenture\ Interest}{Capital\ Employed} \times 100$

Using the figures available, Net Profit after tax is €48,000, and we add back the interest on the debentures (€25,000) to calculate:

$ROCE = \frac{48,000 + 25,000}{848,000} \times 100 = 8.25\%$

The Earnings per share (EPS) is calculated by dividing the Net Profit after tax by the number of outstanding ordinary shares. In this case, the formula is:

$EPS = \frac{Net\ Profit\ After\ Tax}{Number\ of\ Ordinary\ Shares}$

Substituting the figures:

$EPS = \frac{48,000}{450,000} = 0.10667€ \approx 8.67€$

To calculate the Dividend Yield, we use the formula:

$Dividend\ Yield = \frac{Dividend\ per\ Share}{Market\ Price\ per\ Share} \times 100$

Here, we know that the Dividend per share is €8.89 and the market price per share is €120. Thus:

$Dividend\ Yield = \frac{8.89}{120} \times 100 = 7.41\%$

The period to recoup a share can be calculated using the formula:

$Period\ to\ Recoup = \frac{Market\ Price\ per\ Share}{Dividend\ per\ Share}$

Thus, using the figures provided:

$Period\ to\ Recoup = \frac{120}{8.89} = 13.5\ years$