From the following information calculate Moore Ltd's rate of return on ordinary shareholders' funds. Ordinary share capital $600,000 Retained profits and reserves $200,000
180,000 $2.00 10% Preference shares, each fully paid
Net profit after tax and before preference dividend $276,000
A) 30.0%
B) 26.0%
C) 20.0%
D) 16.0%

Question

Quizplus · Accepted Answer

The rate of return on ordinary shareholders' funds is calculated as (Net profit after tax - Preference dividend) / (Ordinary share capital + Retained profits and reserves). The preference dividend is 10% of $360,000 ($2.00 x 180,000 shares), which is $36,000. Therefore, the return is ($276,000 - $36,000) / ($600,000 + $200,000) = $240,000 / $800,000 = 30.0%.

From the Following Information Calculate Moore Ltd's Rate of Return