Question

SA ONE Limited

Extract of Statement of Financial Position as at 31 December 2018 and 2019
$		$
Total assets	830,000		820,000
Total liabilities	650,200		661,500
Share capital - ordinary (5,000 shares, $2)	10,000		10,000
Share capital - preference (3,000 shares, $1, 20%)	3,000		3,000
Retained earnings	166,800		145,500
179,800		158,500

A net income of $30,000 was reported in 2019 (2018: $23,000).
Cash dividends attributable to 2018 and 2019 were declared and paid to both the preference shareholders and the ordinary shareholders before the end of each respective year. Total dividends were $8,700 in 2019 (2018: $7,500).
Each ordinary share of the company was currently traded at $180 in the stock market.

Required:
(a) Calculate below in 2019:
(i) Return on equity.
(ii) Return on common equity.
(iii) Dividend payout rate.
(iv) Book value per preference share as at 31 December 2019.
(v) Book value per ordinary share as at 31 December 2019.
(b) Comment on the difference between the market price and the book value per ordinary share.

Answer 1