The following are extracted from the balance sheets as at 31 March 2004 and 31 March 2005 of Glebe Ltd:

Required:

(a) Calculate for each of the two years two ratios that indicate the liquidity position of the company.

(b) (i) From the information given, give reasons for the changes which have occurred in the working capital.
(ii) What other information regarding the current assets and current liabilities would you consider necessary to assess the ability of the business to continue in operation?

(c) Discuss any other information available from a balance sheet that may affect an assessment of the liquidity of a business.

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31 March 2004 31 March 2005 E Current assets Inventory 20,000 25,000 Trade accounts receivable 10,000 17,000 Cash 5,000 3,000 35,000 45,000 Current liabilities Trade accounts payable 12,000 16,000 Bank overdraft 7,000 34,000 (19,000) (50,000) 16,000 (5,000)