1. Assume that you are the Chief Executive Officer of the XYZ Company Ltd an importer, manufacturer and distributor of electrical equipments in Tanzania. The company sells its goods on terms of 2/10, net 30 and extracts from its financial statements over the last 3 years are presented in the table below (figures in Tshs million): 2017 2018 2019 Cash 30 20 5 Accounts receivable 200 200 290 Inventory 400 480 600 Net Fixed Assets 800 800 800 1,430 1,580 1,695 Accounts payable 230 320 380 Accruals 200 210 225 Bank loan, short term 100 100 140 Long-term debt 300 300 300 Common stock 100 100 100 Retained Earnings 500 550 550 1,430 1,580 1,695 Sales 4,000 4,300 3,800 Cost of goods sold 3,200 3,600 3,300 Net Profit 300 200 100 Assume further that of late you have become concerned about the performance of your company in lieu of the current competitive markets resulting out of the many companies that have mushroomed specializing in the same business. In order to position your company adequately and make appropriate recommendations to the Board you have asked the companys Accountant to give you any valuable information there might be regarding the companys performance. He has responded by computing and submitting the following ratios to you. 2017 2018 2019 Current ratio 1.19 1.25 1.20 Acid-test ratio 0.43 0.46 0.40 Average collection period 18 22 27 Inventory turnover NA 8.2 6.1 Total debt to net worth 1.38 1.40 1.61 Long-term debt to total capitalization 0.33 0.32 0.32 Gross profit margin 0.200 0.163 0.132 Net profit margin 0.075 0.047 0.026 Asset turnover 2.80 2.76 2.24 Return to assets 0.21 0.13 0.06 Required: (i) Only using the information available analyze the companys financial condition and performance over the last 3 years and evaluate whether the company is facing any problems? What would you say to the Companys Board of Directors regarding the financial health of the company? (ii) Highlight the potential problems that you might encounter in using ratio analysis to analyze the financial health and performance of your company