Several potential investors have been studying the affairs of Northern Steel Ltd to decide whether to invest in the company by purchasing unsecured notes which the company was proposing to issue. There was some speculation that the company was experiencing liquidity problems. The statements of financial position at 30 June 2023 and 2024 follow.

Required

(a) Calculate appropriate liquidity and financial stability ratios for the years ended 30 June 2023 and 2024. Research reveals that typical ratios in the industry for the current and quick ratios are 1.7:1 and 1.0:1 respectively. For financial stability ratios, industry averages are 2.5:1 for the capitalisation ratio and 60% for the debt ratio.

(b) Comment on the liquidity and financial stability of the company, given the information available.

(c) Would you, as one of the potential purchasers of the unsecured notes, lend money to the company? Explain why or why not.

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Current assets Cash at bank Northern Steel LTD Statements of financial position as at 30 June Marketable securities Accounts receivable (net) Inventories Other current assets Total current assets Non-current assets Total assets Current liabilities Accounts payable Bills payable Current maturities of long-term debt Accrued expenses Provisions Total current liabilities Non-current liabilities Long-term debt 2024 2023 $6528 $5 664 3 038 3 550 2356 5238 1860 3 696 8 188 9210 25 348 39 920 $65 268 23 980 32 552 $56 532 $9 760 $8 600 5110 3148 1956 900 1440 1456 -6840 23 144 -4690 20 756 Accrued expenses (payroll) Other non-current liabilities Total non-current liabilities Total liabilities 11 600 12 850 4 780 29 230 52 374 8 320 11 460 4110 23 890 44.646