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:

Notes 1 The debentures are secured on the freehold land and buildings.
2 Selling and distribution expenses include £170,000 in respect of bad debts.

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 to be significant.

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

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Balance sheet as at 30 November Non-current assets Property, plant and equipment Freehold land and buildings at cost Plant and machinery at cost Less Accumulated depreciation Current assets Stocks 000 000 000 228 942 180 762 990 600 Trade debtors 820 1,420 Less Current liabilities Trade creditors 665 Taxation 48 Bank overdraft 432 1,145 275 1,265 Less Non-current liabilities 9% debentures (Note 1) 200 1,065 Equity Ordinary shares of 1 each Retained profits 700 365 1,065