The following are the balance sheet and profit statement of Geranium Ltd:

Balance sheet at) 1 December 19X1 19X2 Fixed Assets £000 £000 Machinery at cost 52 60 Less." Accumulated Depreciation 20 15 32 45 Current Assets Inventory 7 2 Debtors 3 Cash 2 12 10 Current Liabilities Creditors 3 5 Dividends payable 2 4 Net Current Assets 8 3 £40 £48 Financed by Owners' Equity Ordinary £ 1 shares 26 26 Retained profit 6 10 32 36 8% Preference shares £ 1 4 32 40 Long-term Liabilities 10% Debentures 19X6 8 8 -- £40 £48 Profit statementjor 19X2 £000 Sales revenue 60 Less: Cost of goods sold 49 Gross profit 11 Less: 0 ther expenses depreciation 13 interest- debentures and loans 1 administration 13 profit on sale of machinery (22) 5 - Net profit 6 Dividends - ordinary 2 I ncrease in retained profit £ 4 Note (J) An item of machinery which cost £42,000 with a net book value of£24,000 was sold for £46,000.
Using the above data and any assumptions you think necessary analyse the following questions:

(a) has the financial risk of the firm changed during 19X2?

(b) what factors would determine whether the optimal financial structure has been maintained?

(c) has the liquidity of the firm improved or deteriorated during 19X2?

(d) to what extent can the debtors and inventory be considered as available to payoff creditors?

(e) prepare a statement which explains the change in working capital during 19X2.
(jl prepare a statement which explains the change in cash during 19X2.
(gJ what should be the financial structure if the firm intends to acquire fixed assets as follows 19X3 £50,000 19X4 £20,000