Data for White Star Limited is as follows:

WHITE STAR LIMITED BALANCE SHEET AS AT 30 JUNE 2022 2021

$m $m Current assets Cash 50 330 Receivables 540 310 Inventories 450 260 Total current assets 1 040 900 Noncurrent assets Property, plant and equipment 160 140 Total noncurrent assets 160 140 Total assets 1 200 1 040 Current liabilities Creditors and borrowings 630 510 Provisions 15 10 Total current liabilities 645 520 Noncurrent liabilities Creditors and borrowings 245 195 Provisions 10 15 Total noncurrent liabilities 255 210 Total liabilities 900 730 Net assets 300 310 Shareholders’ equity Share capital ($1 ordinary shares) 80 80 Reserves 35 35 Retained profits 185 195 Total shareholders’ equity 300 310 Additional information:

Net operating profit after tax is $25 million (2021: $38 million).

1 Use the information provided to calculate for 2022 and 2021:

a return on equity b earnings per share c working capital d current ratio e quick ratio f debt-to-equity ratio.

2 Identify two warning signals that could have negative implications with respect to the company’s ability to generate cash flows to meet its future needs. In each case, explain why the signal you have identified could reflect a cash flow problem.

3 At the annual general meeting of White Star, the managing director, Ms Rose Dawson, made the following statement: ‘Recently a number of articles in the financial press have questioned the financial position of our company. This criticism is totally unjustified. Net profit was $25 million and total assets have increased by $160 million. These results show that 2022 was a very successful year for White Star.’ Comment on Ms Dawson’s statement.