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 financial statements for the business is set out as follows:

1 The loan notes are secured on the land and buildings.
2 Selling and distribution expenses include £170,000 in respect of bad debts.
3 A dividend of £160,000 was paid on the ordinary shares during the year.
4 The directors have invited an investor to take up a new issue of ordinary shares in the business at £6.40 each making a total investment of £200,000. The directors wish to use the funds to finance a programme of further expansion.
Required:

(a) Analyse the financial position and performance of the business and comment on any features that you consider significant.

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

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Statement of financial position as at 30 November 000 ASSETS Non-current assets Property, plant and equipment (cost less depreciation) Land and buildings 228 Plant and machinery 762 990 Current assets Inventories Trade receivables Total assets EQUITY AND LIABILITIES Equity Ordinary shares of 1 each Retained earnings Non-current liabilities Borrowings - 9% loan notes (Note 1) Current liabilities Trade payables Taxation Short-term borrowings (all bank overdraft) Total equity and liabilities 600 820 1,420 2,410 700 365 1,065 200 665 48 432 1,145 2,410