You are the audit manager of Jenstone Ltd, a furniture maker, and are preparing a final review of the financial report for the year ended 30 June 2015. You know from your discussions with the client that it has been having a difficult time of it recently after a customer went into liquidation. This created cash flow problems that resulted in Jenstone being late in making the most recent repayment against the bank loan. This was the second time it had breached the terms of its loan agreement in the last four months.

Below are some extracts from the financial report for the year ended 30 June:

Required

Discuss the above extract from the financial report in light of the difficulties referred to above.

Transcribed Image Text:

2015 2014 $m $m Income statement Revenue 18.6 19.7 7.4 9.3 Gross Profit Profit before tax Non-Current assets 0.4 2.6 Property, plant and equipment 11.8 8.7 Current Assets Inventory 2.7 1.2 Trade receivables 1.4 0.8 Cash 0.4 Current Liabilities Overdraft 0.7 - Trade payables 1.9 0.9 Bank loan 4.8 0.2