Conday and Co. Ltd has been in operation for three years and produces antique reproduction furniture for the export market. The most recent set of accounts for the company is set out below:

Notes:
1 . The debentures are secured on the freehold land and buildings.
2. Selling and distribution expenses include £I70,(XK) in respect of bad debts.
An investor has been approached by the company to invest £200,000 by purchasing ordinary shares in the company at £6.40 each. The company wishes to use the funds to finance a programme of further expansion.

(a) Analyse the financial position and performance of the company and comment on any features you consider to be significant.

(b) State, with reasons, whether or not the investor should invest in the company on the terms outlined.

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Balance Sheet as at 30 November 19X0 000 000 000 Fixed assets Freehold land and buildings at cost Plant and machinery at cost Less: Accumulated depreciation 228 942 180 762 990 Current assets Stocks 600 Trade debtors 820 1,420 Less: Creditors: amounts falling due within one year Trade creditors 665 Taxation 95 Bank overdraft 385 1,145 275 1,265 Less: Creditors amounts falling due in more than one year 12% debentures (note I) 200 1,065 Capital and reserves Ordinary shares of l each 700 Retained profits 365 1,065