The following figures have been extracted from the final accounts of Shannon plc, a company involved in the renewable energy industry, for the year ended 31/12/2018 - Leaving Cert Accounting - Question 5 - 2019

The formula for Dividend Yield is:

ext{Dividend Yield} = rac{ ext{Dividend per Share}}{ ext{Market Price per Share}} imes 100.

In this case:

• Dividend per share = €0.07
• Market price per share = €1.35

Thus:

ext{Dividend Yield} = rac{0.07}{1.35} imes 100 ightarrow 5.19 ext{ %}.

Dividend cover can be calculated using:

ext{Dividend Cover} = rac{ ext{Net Profit}}{ ext{Ordinary Dividend}}.

Using the values:

• Net Profit = €90,000
• Dividend paid = €35,000

Calculating:

ext{Dividend Cover} = rac{90,000 - 20,000}{35,000} = 2.$$

The formula for Return on Capital Employed (ROCE) is:

ext{ROCE} = rac{ ext{Net Profit} + ext{Interest}}{ ext{Capital Employed}} imes 100.

Here:

• Net Profit = €90,000
• Interest is included in the debentures (not specified, assuming €0 for simplicity)
• Capital Employed = €1,087,000

Thus:

ext{Return on Capital Employed} = rac{90,000 + 0}{1,087,000} imes 100 = 8.26 ext{ %}.$$

The formula for Price Earnings Ratio (PER) is:

ext{PER} = rac{ ext{Market Price per Share}}{ ext{Earnings per Share}}.

With:

• Market Price per Share = €1.35
• Earnings per Share = rac{Net Profit}{Ordinary Shares Issued} = rac{90,000 - 20,000}{500,000} = 0.14.

Therefore:

ext{PER} = rac{1.35}{0.14} = 9.64.$$

Shareholder satisfaction can be evaluated through profitability, dividend policy, state of affairs, and prospects:

Performance

The return on capital employed for 2018 is 8.66%, which is an increase from last year's 5.8%. This indicates stronger profitability and efficient resource management.

Dividend Policy

With a dividend cover of 2 times, indicating shareholders receive a substantial return while retaining funds for potential growth, suggests satisfaction among investors.

State of Affairs

The improvement in liquidity, moving from 0.86:1 to 0.71:1, indicates better financial health, reassuring shareholders about the firm's ability to meet its obligations.

Prospects

With an increasing market value of shares and investments, long-term prospects in the renewable energy sector present promising returns for shareholders. The firm has shown resilience and adaptability, pointing towards a positive outlook.

Overall, shareholders would likely be satisfied due to robust performance indicators and positive prospects.

The current ratio is calculated using:

ext{Current Ratio} = rac{ ext{Current Assets}}{ ext{Current Liabilities}}

From Gener8 Ltd's information:

• Current Assets = Closing Stock + Debtors - Expenses Prepaid = €47,000 + €39,000 + €15,000 = €101,000.
• Current Liabilities = Creditors + Bank Overdraft + Expenses Accrued = €45,000 + €16,500 + €15,000 = €76,500.
  Thus:

ext{Current Ratio} = rac{101,000}{76,500} ightarrow 1.32.$$

The acid test ratio, or quick ratio, is calculated as follows:

ext{Acid Test Ratio} = rac{ ext{Current Assets} - ext{Closing Stock}}{ ext{Current Liabilities}}

Using:

• Current Assets (as above) = €101,000
• Current Liabilities = €76,500

Thus:

ightarrow 0.71.$$

Analyzing Gener8 Ltd's liquidity position is crucial for several reasons:

• Financial Health: Understanding the liquidity position ensures Shannon plc assesses whether Gener8 can meet short-term obligations and sustain operations.
• Investment Decision: A company with better liquidity ratios may yield more stability and reliability as an investment, overseeing potential risks associated with acquisitions.
• Operational Efficiency: Evaluating liquidity reveals how effectively Gener8 manages its assets and liabilities to sustain day-to-day operations.

In summary, ensuring Gener8 has adequate liquidity boosts confidence in a successful acquisition.