a) Five users of accounting information and their needs are:

1. Management/Owners: They need information to assess the performance of the business, make strategic decisions, and plan for future operations. For example, profitability ratios help in evaluating efficiency.
2. Investors/Shareholders: They require data on profitability, dividends, and financial stability to decide on buying, holding, or selling shares. Earnings per share (EPS) is key for them.
3. Creditors/Lenders: They focus on liquidity and solvency to evaluate the ability to repay loans. Ratios like gearing and interest cover are crucial.
4. Government/Tax Authorities: They use accounting information to assess tax liabilities and ensure compliance with regulations, such as verifying profit before tax.
5. Employees: They need information on the company’s financial health to gauge job security, potential for wage increases, or bonuses, often looking at overall profitability and reserves.

b) Calculations of the ratios:

i) Sales to Capital Employed (also known as Capital Turnover Ratio): This is calculated as Sales / Capital Employed. Capital Employed = Equity + Non-Current Liabilities = 570,000 + 550,000 = 1,120,000. Sales = 1,400,000. Thus, 1,400,000 / 1,120,000 = 1.25 times.

To arrive at the solution: Identify capital employed as total assets minus current liabilities (1,440,000 – 320,000 = 1,120,000) or equity plus long-term debt. Divide turnover by this figure.

ii) Liquid (Acid Test) Ratio: This is (Current Assets – Inventory) / Current Liabilities = (340,000 – 180,000) / 320,000 = 160,000 / 320,000 = 0.50:1.

iii) Interest Cover: This is Operating Profit / Interest Payable = 396,000 / 50,000 = 7.92 times.

To arrive: Use profit before interest (operating profit) divided by interest expense.

iv) Dividend Cover: This is Profit After Tax / Ordinary Dividend = 288,000 / 250,000 = 1.15 times.

To arrive: Profit available for dividends divided by dividends paid.

v) Gearing Ratio: This is Debt / (Debt + Equity) = 550,000 / (550,000 + 570,000) = 550,000 / 1,120,000 = 49.11%.

Sometimes expressed as Debt / Equity = 550,000 / 570,000 = 96.49%.

(Assuming the percentage form for debt to total capital.)

To arrive: Calculate long-term debt over total capital employed, multiplied by 100 for percentage.

vi) Earnings Per Share (EPS): Profit After Tax / Number of Ordinary Shares = 288,000 / 450,000 = GHȼ 0.64.

To arrive: Divide net profit attributable to ordinary shareholders by the number of shares (assuming GHȼ1 per share indicates 450,000 shares).

vii) The gearing ratio of approximately 49% indicates a moderate level of gearing, meaning the company relies on a balanced mix of debt and equity financing. For ordinary shareholders, this implies higher potential returns if profits exceed interest costs (financial leverage), but also increased risk as debt obligations must be met regardless of profits, potentially leading to reduced dividends or equity dilution in tough times. In Ghanaian banking context, high gearing could raise concerns under BoG’s Capital Requirements Directive, affecting shareholder confidence in stability.