The role of a financial statement analyst is to use financial reports prepared by an organisation together with other information, to evaluate the past, present and future performance of an organisation for the purpose of making investment, credit and other decisions. In relation to the above statement, outline FOUR types of economic decisions that a financial analyst could make from the analysis of financial statements of an organisation. (b) The profit after tax of Baragoh Ltd. for the year ended 30 September 2022 was Sh.15 million. As at 1 October 2021, the company had in issue 36 million equity shares and Sh.10 million 8% convertible loan note. The loan note will mature in year 2023 and will be redeemed at par or converted to equity shares on the basis of 25 shares for each Sh.100 of loan note at the loan note holder’s option. On 1 January 2022, Baragoh Ltd. made a fully subscribed rights issue of one new share for every four shares held at a price of Sh.2.80 each. The market price of the equity shares of Baragoh Ltd. immediately before the issue was Sh.3.80. The earnings per share (EPS) reported for the year ended 30 September 2021 was Sh.0.35. Baragoh income tax rate is 25%. Required: Calculate the following for the year ended 30 September 2022: (i) Basic earnings per share (EPS) for Baragoh Ltd. (including comparatives). (ii) Diluted earnings per share (EPS) (comparatives not required) that would be disclosed for the year ended 30 September 2022.

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter2: Financial Statements And The Annual Report

Section: Chapter Questions

Problem 2.11E

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The role of a financial statement analyst is to use financial reports prepared by an organisation together with other information, to evaluate the past, present and future performance of an organisation for the purpose of making investment, credit and other decisions. In relation to the above statement, outline FOUR types of economic decisions that a financial analyst could make from the analysis of financial statements of an organisation. (b) The profit after tax of Baragoh Ltd. for the year ended 30 September 2022 was Sh.15 million. As at 1 October 2021, the company had in issue 36 million equity shares and Sh.10 million 8% convertible loan note. The loan note will mature in year 2023 and will be redeemed at par or converted to equity shares on the basis of 25 shares for each Sh.100 of loan note at the loan note holder’s option. On 1 January 2022, Baragoh Ltd. made a fully subscribed rights issue of one new share for every four shares held at a price of Sh.2.80 each. The market price of the equity shares of Baragoh Ltd. immediately before the issue was Sh.3.80. The earnings per share (EPS) reported for the year ended 30 September 2021 was Sh.0.35. Baragoh income tax rate is 25%. Required: Calculate the following for the year ended 30 September 2022: (i) Basic earnings per share (EPS) for Baragoh Ltd. (including comparatives). (ii) Diluted earnings per share (EPS) (comparatives not required) that would be disclosed for the year ended 30 September 2022.

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