Grayson Global Ltd has excess cash that it wishes to invest in the ordinary shares of Nolan E-Corp Ltd. Daniel Grayson, finance director of Grayson Global Ltd, has a copy of Nolan E-Corp Ltd’s most recent financial statements and a summary of key information is presented below. 

Required

To make this investment decision, Daniel would like to know about the financial trends of Nolan E-Corp Ltd over the past 3 years. As Daniel’s assistant, you are required to answer each of the following questions using the data above and explain your reasoning for each answer.

(a) Are customers of Nolan E-Corp Ltd paying their invoices faster or slower now than they did in 2015?

(b) Is it becoming easier or harder for Nolan E-Corp Ltd to pay its invoices as they come due?

(c) Has the balance in Nolan E-Corp Ltd’s accounts receivable increasing, decreasing or staying constant?

(d) Is the amount carried in Nolan E-Corp Ltd’s inventory increased, decreased or stayed constant since 2015?

(e) Is the amount of earnings per share increasing or decreasing? 

(f) Is Nolan E-Corp Ltd’s financially leveraging to the advantage of its shareholders? Nolan E-Corp Ltd is charged 10% interest by the bank.

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Current ratio Quick ratio Accounts receivable turnover Inventory turnover Sales as a % of 2015 base year Dividends per share Dividend payout rate Return on total assets ratio using profit before tax Return on ordinary shareholders' equity (No additional shares issued from 2015-2017) Gross profit margin 2017 2.5:1 0.5:1 7.2 times 6.1 times 142% $3.00 50% 14 cents 14.7 cents 40% 2016 2.0:1 0.9:1 8.4 times 7.3 times 121% $3.00 60% 12.4 cents 13 cents 40% 2015 1.3:1 1.4:1 6.8 times 7.6 times 100% $3.00 70% 9.7 cents 10.2 cents 40%