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## JAY Co

The following scenario relates to questions 21–25.

Summary financial information for JAY Co is given below, covering the last two years.

 STATEMENT OF PROFIT OR LOSS (EXTRACT) 20X8 20X7 $'000$'000 Revenue 74,521 68,000 Cost of sales 28,256 25,772 Salaries and wages 20,027 19,562 Other costs 11,489 9,160 Profit before interest and tax 14,749 13,506 Interest 1,553 1,863 Tax 4,347 3,726 Profit after interest and tax 8,849 7,917 Dividends payable 4,800 3,100
 STATEMENT OF FINANCIAL POSITION (EXTRACT) 20X8 20X7 $'000$'000 Shareholders' funds 39,900 35,087 Long-term debt 14,000 17,500 53,900 52,587

 Other information Number of shares in issue ('000)                                                                   14,000                 14,000 P/E ratio (average for year) JAY Co                                                                                                            14.0                    13.0 Industry                                                                                                            15.2                    15.0 Shareholders' investment EPS                                                                                                                 $0.63$0.57 Share price                                                                                                      $8.82$7.41 Dividend per share                                                                                          $0.34$0.22
21. What is the total shareholder return?
22. What is the percentage increase in return on capital (ROCE) for JAY Co between 20X7 and 20X8 (to one decimal place)?
23. Accounting profits may not be the best measure of a company's performance. Which of the following statements support this theory?
1. Profits are affected by accounting policies.
2. Profits take no account of risk.
3. Profits take no account of the level of investment made during the year.
4. Profits are measures of short-term historic performance.
24. What is the operating profit margin for 20X8 (to one decimal place)?
25. As well as the information above, the following extra data is available:

20X8              20X7

Gearing (debt/equity)                             35.1%            49.9%

Interest cover (PBIT/interest)                  9.5                  7.2

Inflation                                                    3%                  3%

Based on all of the information available, are the following statements true or false?

1. Employees may be unhappy with their wages in 20X8.
2. Financial risk for shareholders appears to be a problem area.