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CLASSIFICATION BY IMMEDIATE DELIVERY OR FUTURE DELIVERY
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© S. Mpembele and B. Mwiya, SB 2007 25

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Year Beginning Payment Interest Repayment Remaining

Amount of principal Balance
1) 2) 3) 2)-3)=4) 1)-4)=5)
1 1000 374.11 60 314.11 685.89
2 685.89 374.11 41.15 332.96 352.93
3 352.93 374.11 21.18 352.93 0.00
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© S. Mpembele and B. Mwiya, SB 2007 33

 " $& ' 7 %-.

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period Beginning Payment Interest Repayment Remaining

Amount of principal Balance
1) 2) 3) 2)-3)=4) 1)-4)=5)
1 100,000,000.00 9,455,996.52 2,000,000.00 7,455,996.52 92,544,003.48
2 92,544,003.48 9,455,996.52 1,850,880.07 7,605,116.45 84,938,887.03
3 84,938,887.03 9,455,996.52 1,698,777.74 7,757,218.78 77,181,668.25
4 77,181,668.25 9,455,996.52 1,543,633.37 7,912,363.15 69,269,305.10
5 69,269,305.10 9,455,996.52 1,385,386.10 8,070,610.42 61,198,694.68
6 61,198,694.68 9,455,996.52 1,223,973.89 8,232,022.63 52,966,672.05
7 52,966,672.05 9,455,996.52 1,059,333.44 8,396,663.08 44,570,008.97
8 44,570,008.97 9,455,996.52 891,400.18 8,564,596.34 36,005,412.63
9 36,005,412.63 9,455,996.52 720,108.25 8,735,888.27 27,269,524.36
10 27,269,524.36 9,455,996.52 545,390.49 8,910,606.03 18,358,918.33
11 18,358,918.33 9,455,996.52 367,178.37 9,088,818.15 9,270,100.18
12 9,270,100.18 9,455,996.52 185,402.00 9,270,594.52 (494.34)
113,471,958.24 13,471,463.90 100,000,494.34

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© S. Mpembele and B. Mwiya, SB 2007 34

 =

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n
Asset V= CF1 + CF2 + CF2 = CFt
Value (1+K) 1 (1 + K) 2 (1+K) n t=1
(1+K) t
R R R R R R 2

' D

JD H

% + H
" "J % "
H

© S. Mpembele and B. Mwiya, SB 2007 35

 ! " C
" ! /" 0 !
$ " " I / /==.
J25" ==="=== " 25"=== J+===
J25" ==="===
J25" ==="=== J25" ==="==="
J25" ==="=== <
J25" ==="===B 7 "

' # .(
" J+" ==="
J+" === J5" ===

" ( -" 4% $
J
' " " "
$ J+=== 1
J+5= == J+5= =="
J+5= == J+=== +5E J+===
" " "

$( ' $4 $
<
" / I /==." + I /=+:H
+5 !
+= 3= "

.. '" # ! "
# V
W 7
" !
!
% > 0 "

# "
? "
! "
" J+5=
J+==="

© S. Mpembele and B. Mwiya, SB 2007 36

 $ + ,(

+
7 "
"
7 "

= JE + / . ?(+ ?
(((((((((((((((((
6 7 7 7 7 7

' J D
D
7 D7 D
D D J+===
A "

+5E + / +3 +5
R R R R

6 +5= +5= +5= +5=

+"===
A DE

?
,

Bond value = Vd = Int + Int + Int + M

(1 + kd) 1 (1+kd) 2 (1+kd) (1+kd) n
N
= INT + M
t=1 R R R R R :
(1+kd) t (1+kd)N

?< "
/ ,(
Vd = INT (PVIFA kd, N) + M (PVIF kd, N)
R R R R R R R ;

© S. Mpembele and B. Mwiya, SB 2007 37

7 " ,(

+5
6 D \ +5= X J+=== D J+5= 167 %+5"+5 X +=== 167 +5 D @ EEE
D+ +X = +5 +5 + +5 +5

) J +5E "
B / "
+3 " ? D +3 ' 6
J +"===

6 D J+5= 5 2/35 X J+" === + +3+. D J;;; ;: ] J+" ===

< J +"=== "J"

+5E " J 7 "
J "
? "
"J " +5E +=E <
" 167 167 %
/ J D +=E
?D+3 ,(

6 D J +5= 167 % +=E " +3 X +=== 167 +=E "+3

D J +"+=5 =+ X J/4. .=
D @ A;F> ;

7 J " 1

& ." / & 0 $& . (. $" ,

J +=E J +"===
C "
J+== J+5= ? J +5=
J+==" J +=== C
% F "
J+" .4: .+"
! +=E

© S. Mpembele and B. Mwiya, SB 2007 38

 0 $& $ ' !$ $ " " 0 3 *

) +3( " +5E " J +=== J

+.4: .+ '
B C G "

/ . J

6 D J+".4: .+ D J+5= X R R X J+5= X J+===

+X + +X +3 +X +3

D J+5= 167 % " +3 X J+=== 167 " +3

" D +=E G
%
G ,

MV − Vb 1000 − 1368.31
PMT + ( ) 150 + ( )
YTM = N = 14 G EJ
2Vb + MV 2(1368.31) + 1000
3 3

% "
"
) / .

/? 7? ^ /__ X
6 D ` +X * / / +X */
D+

D 7? 167 % X 167 /?
/ / /? /"

" J25 4 J+5=

"
' +=E " +5(
,(

6 D J25 167 %5" .= X J+=== 167 5" .=

D J25 +5 .2/5 X J+=== = /.+3

D J+" +5/ ;3 X J/.+ 3=

© S. Mpembele and B. Mwiya, SB 2007 39

 D @ A ;>? ;?

.. / . " 0!

A
G % +5 "+5E " 6DJ+===
DJ+.4: .+" 5
5 J+/== ==

6 D J+5= 167 % " 5 X J+/== 167 "5

CP − Vb 1200 − 1368.31
PMT + ( ) 150 + ( )
YTM = N = 5 = 8.9%
2Vb + CP 2(1368.31) + 1200
3 3

Annual int erest + accruedCapiat lg ain

ApproximateYTM =
AverageBondValue

( '' $ 4 .0

Coupon
= CurrentYield
Market Pr ice

7 +=E +/== J+===

G : ..E 7 D
G
7 "

© S. Mpembele and B. Mwiya, SB 2007 40

 E
@

@
1 )
% 1 ) J/
+=E "

d
Pr eferredDividend d 2
PPS = VPs = = = m = = K 20
Re quiredRateof Re turn r r 0.1
m
?
?
1 ) 7 " "
7
8 ?7

1 )
7 1

" "

@
) %
F

+ 7 " "
A

' "
7 " * " *

/ ) " 7
"
7 "
6 1 D 16

-+ X -/ X -. X R R X -a
+X + +X / +X . +X a R R R R R R +=

a
\ -
D+ +X R R R R R R R R R R R R R R R R R R R R R R R R R R ++

1 D 16 *

,(
-

) " ( "
F
3 * $" + # .( ! 9 $& 2 '" '" 9 $& ' $

) "
A F "

7 - D -+ D-/ D-. D-a, += ,(

1 D - X - XR R R R X -a
+X + +X / +X a R R R R R R R +/

% "
" F

% ,

1D D R R R R R R R +.

"7 J+ +2
+. 4E ,

1 D J + +2 D J : 4=
= +.4

© S. Mpembele and B. Mwiya, SB 2007 42

< 3 >
,

9D -
1 R R R R R R R R R R R R R R R R R R +3

"7 J : 4=" J
+ +2" ,

9 D + +2 D +. 4E
: 4=

36* " ! $ $ '" 9 $&

7 "

D1 = do (1+g) 1, d2 = do (1+g) 2 = d1 (1+g) 1

R R R R R R R R R +4

Pcs = do (1+g)1 + do (1+g)2 +……+ do (1+g)t R R R R R R +2

(1+k)1 (1+k)2 (1+k)t

D \ +X
+X

+2

Po = d1 R R R R R +:
k-g , where k>g and k g

$ +: 0 !
F

+ %/
(+ ' 2) &( - .&
( 2) &( %-3.

+2
+X J * +X +2

1 D +
(

© S. Mpembele and B. Mwiya, SB 2007 43

 ( D + D0 # 0 0 4 .0
1

D + X $" $ . 4 .0

) D X

% D D + (
&

D D 1+ ( 1=
& 1

3;* ' /. '" 9 $&

) J / == /==.
+5E . " +=E +:E

A + D +5E
/D +=E

1= D \ +X X X + +
+X ( / +X

' X +D

+ D + +5 D / + +5 D / .=
/ D + + +5 D / .= + +5 D / 45
. D / + +5 D / 45 + +5 D . =5

' # 0 0! $ ' !$3 >A;* #

+ / .= = :32 + ;5
/ / 45 = 2+: + ;=
. . =5 = 4=: + :5
D HE
X+ D 3 D . +X /
D . =5 +X = +
D . .4

1. D . .4 D . .4 D J3/
= +: ! = += = =:

) 16 1. D 3/ 167 " +:" .

© S. Mpembele and B. Mwiya, SB 2007 44

 D 3/ = 4=:
D 6D D?

1 D 5 2= X /5 53
D J.+ /3
"

+ ( 16
/ ( "

. % 1

© S. Mpembele and B. Mwiya, SB 2007 45

 @
" "
% $
9
*

0 % + '" ( 0 $" !+ % $
9 9
9 +;5=C %
9

9 %
>
V 1 $ V +;5. F
7 # "
" >
(

'" 1 ''4 '+" 9 $2 3 =D6* ' -. " 1 -" '$1" . " ! . $ "
9 9 "
< +;5=C
1 F +;5/
T
1 *
"
A ,
• 7 F

• $
"
$
9 % % % <
 State Probability(P) ReturnA(RA) ReturnB(RB) PxRA PxRB
Boom 30% 25% -0.2 0.075 -0.06

Avaerage 50% 15% 0.15 0.075 0.075

Recession 20% -20% 0.25 -0.04 0.05

ER 0.11 0.065

• $ 9 $9
$9 D1+ 9+ X 1/ 9/ X R R R R R D 19

7- $ 0 $( ' 1" ' " '$1" . "

%

$9 D' 9
$ " 5=E % 5= E <
1 > *% 7 '
% J25"==="=== =5
< J25"==="=== =5

? + ==

$9 D' $9 X ' $9
D = 5 = ++ X = 5= = =45
D = =:25
• 9
9 $9

& 0 ! - '! " ! % ! ( ' 0 / 4 $& ! $ 0 '0 0 # $ "

δ D Variance(δ 2 )

δ 2G 3 C *6 M 6 3 6C *6M N N N N

© S. Mpembele and B. Mwiya, SB 2007 47

 P RA PxRA R-ER (R- ER)2 P(R-ER)2
30% 25% 0.075 0.14 0.0196 0.00588
0
50% 15% 0.075 0.04 0.0016 0.0008
0
20% -20% -0.04 -0.31 0.0961 0.01922
ER 0.11 Variance 0.0259
standard deviation 0.160935

P RB PxRB R-ER (R- ER)2 P(R-ER)2

30% -20% -0.06 -0.265 0.070225 0.021068
0
50% 15% 0.075 0.085 0.007225 0.003613
0
20% 25% 0.05 0.185 0.034225 0.006845
ER 0.065 Variance 0.031525
standard deviation 0.177553
? % < ) % R

" 11 $"1 ' $" ! 3 *

! ! $! '" L $ δ
E ; E 6 E =6
E D E D EE
E E E E=

G δ

6 6
$9 <
6 "

" '$1" . " ' ! +

© S. Mpembele and B. Mwiya, SB 2007 48

 δ D wa2δ a2 + wb2δ b2 + 2wa wb Cov( Ra , Rb )

) A
B - B (
9 "9 D 1 9 ! $9 9 !$9

P Ra-ERa Rb-ERb P(Ra-ERa) (Rb-ERb)

0.3 0.14 -0.265 -0.01113
0.5 0.04 0.085 0.0017
0.2 -0.31 0.185 -0.01147
-0.0209

!
• δ $9 '
δ $9

1 C

δ D 0.5 2 (0.1609) 2 + 0.5 2 (0.17755) 2 + 2(0.5)(0.5)(−0.0209)

D = =4 ≈ = ==
#

% <
% '%/ σ 2 A % < σ A, B

= ==432/D= /5 = =/5::; (= ==5//5D= 5 = 5 (= =/=;

< % < σ A, B '</ σ B2
(= ==5//5D= 5 = 5 (= =/=; = ==2::+D= /5 = =.+5/3

% D= ==432/X = ==2::+(= ==5//5(

= ==5//5D= ==.;=./=.
D= =4/5

© S. Mpembele and B. Mwiya, SB 2007 49

 6

7 8 "

&' ! ! $ " '$1" . " !

$ " +*. 1 > % " +*. 1 > < +*. 1 >
1 > *% 7 '
% J5="==="=== = ...
< J5="==="=== = ...
J5="==="=== = ...
? + ==

9 % "

State Probability(P) ReturnA(RA) ReturnB(RB) Returns C PxRA PxRB PXRC

Boom 30% 25% -0.2 0.3 0.075 -0.06 0.09

Avaerage 50% 15% 0.15 0.2 0.075 0.075 0.1

Recession 20% -20% 0.25 0.1 -0.04 0.05 0.02

Expected Returns 0.11 0.065 0.21

1 $ ,

$9 D'% $9% X '< $9 < X ' $9

D = ... = ++ X = ... = =45 X = ... = /+
D = +/:/
• 9
$9

& 0 ! - '! " ! % ! ( ' 0 / 4 $& ! $ 0 '0 0 # $ "

δ D Variance(δ 2 )

© S. Mpembele and B. Mwiya, SB 2007 50

 δ 2G 3 C *6 M 6 3 6C *6M N N N N

P RC PxRC R-ER (R- ER)2 P(R-ER)2

30% 30% 9% 9% 0.0081 0.00243

50% 20% 10% -1% 0.0001 0.00

20% 10% 2% -11% 0.0121 0.00242

ER 0.21 Variance 0.0049
standard deviation 0.07

" '$1" . " ' ! +

δ D

wa2δ a2 + wb2δ b2 + Wc2δ c2 + 2wa wb Cov( Ra , Rb ) + 2wc wa Cov( Rc , Ra ) + 2wc wb Cov( Ra , Rc )

) A
B - (

9 "9 D 1 9 ! $9 9 !$9

P Ra-ERa Rb-ERb P(Ra-ERa) (Rb-ERb)

0.3 0.14 -0.265 -0.01113
0.5 0.04 0.085 0.0017
0.2 -0.31 0.185 -0.01147
-0.0209

9 "9 D 1 9 ! $9 9 !$9
P Ra-ERa Rc-ER c P(Ra-ERa) (Rb-ERb)
0.3 0.14 0.09 0.00378
0.5 0.04 -0.01 -0.0002
0.2 -0.31 -0.11 0.00682
0.0104

9 "9 D 1 9 ! $9 9 !$9
P Rb-ER b Rc-ER c P(Ra-ERa) (Rb-ERb)
0.3 -0.265 0.09 -0.007155
0.5 0.085 -0.01 -0.000425
0.2 0.185 -0.11 -0.00407
-0.01165

© S. Mpembele and B. Mwiya, SB 2007 51

 ! <9 % <
' 9 %
δ
$9 ' δ
$9
1 C

% <
% '%/ σ 2 A % < σ A, B '%' σ A,C

= ==/:2+D= ... = ... = =/5::; (= ==/.+:D= ... = ... ( = ==++5.D= ... = ... = =+=3
= =/=;
< % < σ A, B '</ σ B2 '<' σ B,C
(= ==/.+:D= ... = ... ( = ==.3;4D= ... = ... = =.+5/3 (= ==+/;/D= ... = ... (
= =/=; = =++45
'%' σ A,C '<' σ B,C ' / σ C2
= ==++5.D= ... = ... = =+=3 (= ==+/;/D= ... = ... ( = ===53.D= ... = ... = ==3;
= =++45
% 1 D= ==/:2+X (= ==/.+: X = ==++5.X (= ==/.+: X = ==.3;4X (
= ==+/;/ X = ==++5.X (= ==+/;/ X = ===53. D = ==+;;4
% 1 D= =334: ?
$" '! $& $ ' 0 ( ' !+
• ? "

• '

•
" !+ X+ 7

(+ ) - D=
9 %
$9
<

X+ 1
P
ρ =1

© S. Mpembele and B. Mwiya, SB 2007 52

 A
+
9
$9
%

<

T b= A
"
=
(+ %

δ b=" F

ΡA, B D 9 "9

σa σb

− 0.0209
D
(0.1609)(0.17755)
D (= 2. ≈ −1
% $9 < $9 %
) ΡA, B

9 " 9 D ΡA, B σ a σ b D (= 2.X = +4=; = +2255 D (= =/=:533; D (= =/=;

7 "

© S. Mpembele and B. Mwiya, SB 2007 53

% + ρ <1

7
)
" 1
% < ,

δ D 0.5 2 (0.1609) 2 + 0.5 2 (0.17755) 2 + 2(0.5)(0.5)(−0.0209)

D = =4 ≈ = ==
1 $& " '' . $ " ! - '1 $.4 -" ! $ # A $& -" '$1" . " ! $ 0 '0 0 # $ " / . (. $ 0 !

δ D 0.5 2 (0.1609) 2 + 0.5 2 (0.17755) 2 + 2(0.5)(0.5)(1)(0.1609)(0.17755) D = +4;//5

δ D' δ X ' δ
δ D = 5 = +4=; X = 5 = +2255 D= +4;//5
11 $ '" $ '
7
% ( P
* * 9 "
# "
% $

$ $ $
1 ' $
"

) % <A
$

$9
<
$
%

σp

© S. Mpembele and B. Mwiya, SB 2007 54

 ;
7 8 ?7 %
1 FC

' $ ! %! ! $ '" 1 +" 9 $2

• %

• 9 !

• ' B C

-$ . !! $ ' "0 .3 *
@ 4 ! ! ( %-$ " !
+ % "
0

/ 7
. 7 *
P F C
3 7

5 7 ;= (<

4 ) "

2 " "

- 0 11 ' ( '#

%
1
σ -

% %
< ) %1 " &

© S. Mpembele and B. Mwiya, SB 2007 55

1 9
1
1 & 8 )$
F /=E " .=E N )
F
?

LUSE (assume these are the only invetsemnts)

Mkt Capitalisationv (K) Proportion
CHIL 20,000,000,000.00 0.20
ZSUG 30,000,000,000.00 0.30
ZAMBREW 25,000,000,000.00 0.25
BAT 5,000,000,000.00 0.05
ZAMEFA 20,000,000,000.00 0.20
100,000,000,000.00 1.00

$ 1 %
$
%
7 &

'+ $ ! + # '! ( ! - 1 !+
1 ' ) F 1
F P
< "

4!$ % $ ' !+
"
"
C

<
"
P
< <

© S. Mpembele and B. Mwiya, SB 2007 56

 " C! 4 ! $ % $

7 P

< " 1 %
7
" 7 "
"
% %1 9 <
9 9

!(' "1' !+" ! ! $! ' . $ # $" $& % '+ $ ! 9 &".

< P <
βm D +
7 β i D +" 9 9

7 β i b +" 9 9

7 β i c +" 9 9

<
< %D 9 "9 %
δ m2
1 2 3 4 5 6 7
Year RA RA-ERA Rm (Rm-ER m) (RA-ERA)(Rm-ER m) (Rm-ER m)(Rm-ER m)
1 -0.1 -0.17 -0.4 -0.3 0.051 0.09
2 0.03 -0.04 -0.3 -0.2 0.008 0.04
3 0.2 0.13 0.1 0.2 0.026 0.04
4 0.15 0.08 0.2 0.3 0.024 0.09
Avg 0.07 -0.1 sum 0.109 0.26

$ 1" ' G E E= E 6FE G E ? =

N
βpD < D wi β i D
S =1

) &
) &

© S. Mpembele and B. Mwiya, SB 2007 57

$
9
)

9
<
) & ? F
& ) &
&
Ri = Rf + ( ERm − Rf ) β i

9 " D9
X >
9 D= =4X = +.5(= =4 + ; D/= /5E

9
7

' $ ! %! !$
7 F (

• 7
• 7
• 7

'/ $' ' & " '4 3 *

%1

9 D9 X $9 !9 <+ X $9 / (9 </ X
% /
< "

© S. Mpembele and B. Mwiya, SB 2007 58

 ?
5

% > F
"
> > 7 "

" " " "

% " "
>
A " > "
( > "
7 "
" (
,
d 9 7 9# 7 % 9 9 %99
d 1
d ? 1 6 ?16
d 7 9 9 799
d *< 9 1 7
" %
"
> "

'

"
G J+
J+ +/ L " %) 4,&5 & +/+ , "

"
,
d ' "
-

© S. Mpembele and B. Mwiya, SB 2007 59

d A "
F "
'
& J+ +/ +=E %
J+ +=E D += J+ J+ +="
' &
1/)&
)+ 5 ) J+ " +=E " J++=
& 5) >
&
1 +% &5 )

3 *

" "

' 9# 7 >
> %99
%99
-
"
> "

'
% J+"===
> -

G + / . 3 5
< 4== 4== 5== 5== .==
- /== /== /== /== /==
3== 3== .== .== +==
+/= +/= +=5 +=5 .5
? /:= /:= +;5 +;5 45

'
,
280 + 280 + 195 + 195 + 65
% D = 203
5

© S. Mpembele and B. Mwiya, SB 2007 60

 Averageprofit 203 Average Pr ofit 203
= x100 = 20.3% = x100 = 40.6%
OriginalInvestment 1,000 AverageInvestment 500
% 5 +' 5 %& &
/( " " +"=== */ D J5==
" J5==
"
,

280
G + = 28%
1000
280
G / = 28%
1000

195
G . = 19.5%
1000
195
G 3 = 19.5%
1000
65
G 5 = 6 .5 % " +=+ 5E 5 /= .E "
1000
3= 4E

45 L
L " 7 "
& 5 ) (/ (
%

1 "

> M
M $
(
" "
' >

© S. Mpembele and B. Mwiya, SB 2007 61

 1 > % 1 > <
7 G = 4== 4==
G + 3== 2==
G / /== 3==
G . :== 3==
+"3== +"5==

1 1 > % "
1 1 > < >

1
" > G " "
"

1 " "

© S. Mpembele and B. Mwiya, SB 2007 62

 D

- - ,
> L 7 "
<
( (
> > L
+/ ) 1 ,
7 > "
" >
" "
" "

>
( '%
%1 "
'% "
? %1 %16
A "
? "

1
,
(1 + i ) n
2 3 "

7 "
"
" += "
5E " = 4+3"
= 4+3

7 > "
,
d ? ?16
d 7 799
 - > "
% >
>

3 *
?16 "

?16 > " , %1/( % >

?16 ?16 > "

?16 > >
?16" > >
?16 > "
> > " "

?16 > '%

$ A
?16

7 %-.
% > J+="=== " ,
G + D J4"===
G / D J4"===
G .D J4"===
G 3 D J5"===
G 5 D J5"===
? +=E
> ) > B

" ?

' ! $ # .( " 1 % & ' # ( !<

G ? - ?16
J J
= (+="=== + (+====
+ X 4=== = ;=; 5353
/ X 4=== = :/4 3;54

© S. Mpembele and B. Mwiya, SB 2007 64

. X 4=== = 25+ 35=4
3 X 5=== = 4:. .3+5
5 X 5=== = 4/+ .+=5
+:=== X ++3.4

7 " ,
/:"===
+="===
+:"===

" J++" 3.4

? " (& " "
"

!)&
)+ * ) (5 +
% " +=E ,
J++"=== L J+="===
J+/"+== L J+="===
J+.".+= L J+="===
J+3"43+ L J+="===
) /
)&)+ 5 ) J+="=== +=E ,
G J++"=== G / +/+== G . +..+= G 3 +3"34+

7 %-.

)
,G +" 3== G / 4== . /=== J+"/== ?
J+"/==" "
" ,
- 16
J J
G 3== = ;=;+ .4.43
G / 4== =:/45 3;5 ;=
G . /== =25+. +5=/4
+"==;:=

J+"==; :=
7 >

( 5 &( %6% #* ,) &( %

© S. Mpembele and B. Mwiya, SB 2007 65

K ' ! $ $"

" L $

K !

K '!
% " )&
G N "
+
K % - '"0!
" G =
K . # $1 (' !

> " "

) "
" -
7 " "
>
>
7
"

#& + * )%
7 +=E "
> ,)&
7(/
/+& ,+&+( +& '
" "
" "

7 %-.
% 1 > 9 J/="=== J4"=== G +"
J:"=== G /" J+="=== G .
+=E
1 > 9 7
(J54="
( +=E

© S. Mpembele and B. Mwiya, SB 2007 66

$ , 6
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Stock 400
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creditors 100
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325
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Net Assets 4,525
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& , - /== /==
9 1 J.+: J4.:

/=== /==+
JC=== JC=== JC=== JC===

7 0 ! ! $!
3" =/5 5" =/5
1 /" +42 /" 25=
4" +;/ 2" 225

( '' $ ! ! $!
) /" 4/5 +" :4.
/" /22 +" ;:=
+;: +;.
5" +== 3" =.4
! ! ' 0 $" '! %" ( $!
.. 0 ( ( 0 ' 4 '
+" +25 +"3./
/=. ./2
- /== /==
+" 52: +";5=
DDDDD DDDD

? ." 5// /" =22

DDDDD DDDDD
 ;" 2+3 ;" ===

& ,

+ ! /" 5== /"===

2" /+3 2" :5/
DDDD DDDDD

) 3" === 3" === 3" ===

J+ ." /+3 ." :5/
9 2" /+3 2" :5/
DDDDD DDDDD

3 * $( ' " - $ . %-." 4 % $ 3 *

%
7 "
"
7 "

"
(

EBIT (i.eearningsbeforeInteres tan dTax)

ROCE =
CapitalEmployed (i.eFixedAssets + WorkingCapital )

/=== /==+

1071 1445
9# $D x100 = 11% x100 = 14.7%
9714 9852

150
3/ * $( ' " "9 'B! I ( $4 3 *

" " H # "

/==+ 9
"

Net Pr ofit after long − term int erest and tax

9 D
Ordinary share capital and reserves

-S " <
/=== /==+

838
9 $ D 518 +== D 2 /E +== D += 2E
7852
7214

9
7
> C
9 $
7
" "

* '" ! ! '" 1 $ '

Gross Pr ofit
0 1 D +==E
Sales

-S 1 " ,

/=== /==+

4523 4543
+== D 3/ +== D 3=
10874 11450

5:E /=== 4=E /==+ 1

" /=== J+ " 3/
- /==+" 3= % ,

151
 • $ "
H
• # "
"

"
/==+ " "
/=== 7 H
/==+ /===

7 " "

* $ '" 1 $ '

"
7 ,

Net Pr ofit before tax

? 1 D +==E
Sales

-S 1 ,

/=== /==+

721 1165
+== D 4 4E +== D += /E
10874 11450

/===" 4 4 J
+= / /==+ # /==+"
/=== 7
/==+

152
 6=

"

$ !! $ (' "# '

Sales
? D
Net Assets

-S 1 ,

/=== /==+

10874 11450
? D D++ D+/
9714 9852

J+ J+ +
/=== J+ / /==+

/==+ /=== %

"

$" + ( ' " # '

7 7
"
7 ,

Stock
) D .45
Cost of sales

-S 1 ,

153
 /=== /==+

2625 1863
) D .45 D +5+ .45 D ;:
6351 6907

7 " 7
X /
A " " "
" (

/=== /==+ $
+3 7
"
" "

* / $" '! B $( ' " # ' - ' " 0 3 / $ " .. $ " - '"0

- C !
A >
"
7 ,

Trade Debtors
- 1 D .45
Annual Credit Sales

-S 1 " ,

/=== /==+

2277 1980
- D .45 D 24 .45 D 4.
10874 11450

-S 1 C

" 4. 7 -S

0
) H

30 * ' 0 $" 'B $( ' " # ' - ' " 0

7 ,

154
 Trade credits
C 1 D .45
Total credit purchases

$ "
-S 1

;* 5

P C C
7
> "
" " "

(
,

3 * & ( '' $' $"

" +/ "

( 7 ,

Current assets
D
Current liabilities

-S 1 " ,

/=== /==+

5,100 4036
D D./,+ D / +, +
1578 1959

' "
0 " +, + /, + 9
"

" "

" F
-S 1

155
3/ * & I( + !! $' $" 3 0 $ ! $*
A ( "
"

Current assets less stock

T D
Current liabilities

" " "

-S 1 ,

/=== /==+

5100 − 2625 4036 − 1863

T D D + 4,+ D + +,+
1578 1959
0 +,+
" % "
F

?*

0 (

" P
C &
A !

3 * / $ $" I ( $4 ' $ "

(

Pr ior ch arg e capital ( plus bank overdraft )

- $ D D +==
Ordinary share capital and reserves

-S 1 ,

/=== /==+

156
 2500 2000
- $ D D +==E D .3 2E D +==E D /5 5E
7214 7852
' 0 "

A
-S 1 ( "
J5=="===

3/ * $ ' !$ "# '

7
7

PBIT
7 D
Interest ch arg es

-S 1 ,

/=== /==+

1071 1445
7 D D.+ D5/
350 280

"

F B 3 B *

$
C
C " " C

-S 1 C "
( ,

/=== /==+

J+ , J+ 25 J/ 5=

3 * ' - ' !& '

"
%

157
 " "
!

7 ,

Net Pr ofit after tax and preference dividends

$ D
Number of ordinary share issued

-S 1 "

/=== /==+

518 838
$1) D D +. D /+
4000 4000

3/ * ' ! 4 .0
7 " " 7

C " 7 ,
Earnings per share
$ D +==
Market price per share

-S 1 ,

/=== /==+

13 21
$ D +== D 2 3E +== D : 3E
175 250

3 * ' $"3 ' ' ! ' $"*

1*$ 9 C % 1*$
9 " "
1*$ 9 7

158
 1*$ 9
7 ,

Market price share

1*$ 9 D
Earnings per share

-S 1 ,

/=== /==+

175 250
1*$ D D +. D ++ ;
13 21

) /=== +. "

-S 1 1*$ 9 +. /=== +/ /==+"

*
7 ,

Total dividend for the year

- D
Number of ordinary shares issued

-S 1

/=== /==+

200 200
- D D 5= D 5=
4000 4000

" "

-
-
"

Dividend per share

- D +==
Market price per share

159
 -S 1 ,

/=== /==+

7 5
- D +== D / ;E +== D / =E
175 250

) "

# 0 0 "# '

7
,

Earnings per share

- D
Net Dividend (ordinary ) share

-S 1 ,

/=== /==+

13 21
- D D45 D += 5
200 200

) G

$ "
"

>
>

160
6
" 7 # "
&7 # 7
"

" "

-
G 1 "7 " (
-

9 >

9
" "
9
" 9
9

" $ $& $ ! $( 0 $! ! & " ( .0 0 # " ( ' $" ( 0 '! $ 0 ! & 1." 9 ! $ $ % $ .4 ! !

+ 9 ) /==/ A? - , 0 (A
1 &

/ J $ 9 " ) ,1 1
$ "7 " /==/

. < $ A I /==3 " +=

" ) ' "8 )

4 Gardner and Mills (1988), MANAGING FINANCIAL INSTITUTIONS: AN

ASSET / LIABILITY APPROACH, Dryden press, Sunders college publishing, New
York , U.S.A

161