An extract from the finance statements of Kenyango Fisheries Ltd is shown below: Shs. Issued share capital: 150,000 ordinary shares of Sh. 10 each fully paid 10 % loan stock 1999 Share premium Revenue Reserve Capital employed 1,500,000 2,000,000 1,500,000 7,000,000 12,000,000 - The profits after 30 % tax is Sh. 600,000 . However, interest charge has not been deducted. - Ordinary dividend payout ratio is 40 % . - The current market value of ordinary shares Shs. 36 Required a) Return on capital employed b) Earnings per share c) Price earnings ratio

a) Return on capital employed (ROCE) is calculated as the ratio of earnings before interest and tax (EBIT) to the capital employed. In this case, the profits after tax is given as Sh. 600,000. Since the interest charge has not been deducted, we can assume that the EBIT is also Sh. 600,000. The capital employed can be calculated as the issued share capital, which is Sh. 150,000. Therefore, the ROCE is calculated as:<br /><br />ROCE = EBIT / Capital employed<br /> = Sh. 600,000 / Sh. 150,000<br /> = 4 or 400%<br /><br />b) Earnings per share (EPS) is calculated as the net income divided by the number of shares. In this case, the net income is the profits after tax, which is Sh. 600,000. The number of shares is given as 150,000. Therefore, the EPS is calculated as:<br /><br />EPS = Net income / Number of shares<br /> = Sh. 600,000 / 150,000<br /> = Sh. 4<br /><br />c) Price-earnings ratio (P/E) is calculated as the market value of the shares divided by the earnings per share. In this case, the market value of the shares is given as Sh. 36, and the EPS is calculated as Sh. 4 in part b. Therefore, the P/E ratio is calculated as:<br /><br />P/E = Market value of shares / EPS<br /> = Sh. 36 / Sh. 4<br /> = 9