1. Calculate one profitability ratio, one liquidity ratio, one efficiency ratio and one gearing ratio using information in the financial statements of A & E Enterprise. Refer to appendix C for suggested ratios and their formulae.

2. Using the calculated ratios evaluate the financial performance of A & E Enterprise.

3. Explain with reasons whether the bank will likely provide financial support to their client to enable them buy A & E Enterprise.

4. Explain the limitations of the analysis and evaluation of the financial performance of A & E Enterprise undertaken for the period in view.

Appendix B: Financial statements of A & E Enterprise- (a) Income Statement for the period ended 31st December 2019 Net Sales: Sales Sales returns 111,600 (1,500) 110,1004 LESS: Cost of sales: Opening inventory Purchases Carriage in Purchases returns- 14,208 71,244 1,860 (2,6 02) 84,710 (18,000) LESS: Closing inventory Gross Profit Add: Other incomes: (66,710) 43,3904 0 0 43,390 LESS: Expenses: Carriage out Salaries & Wages Rent & Rates Insurance Motor expenses Telephone Electricity General expenses Net Profit 1,200 22,640 1,824 1,000 2,856 2,624 996 1,884 (35,024) 8,366 (b) Statement of Financial Position as at 31st December 2019 Non-Current Assets: Plant & Machinery Buildings Motor Vehicles at cost Fixtures & Fittings 6 5,000 50,000 10,800 2,100 67,900 Current Assets: Inventory Trade receivables Cash at Bank 18,000 26,010 3,092 47,102 Less: Current Liabilities Trade payables (20,386) Net current assets (working capital) Total Assets CL 4 26,716 94,616 Less: Non- Current Liabilities OOI (0) 94616 Net Assets Financed by: Capital Profit 93,450 8,366 101,816 (7,200) 94,616 LESS: Drawings Appendix C: Ratio formulas: - Ratio Formula Ratio Formula 14 Gross profit (Gross Profit/Sales margin Revenue)*1004 64 Inventory Days Closing Inventory / Cost of Sales * 3654 74 2 Net profit e margin (Net Profit/Sales Revenue)*1002 Debtor Collection Days Trade Receivables/Credit Sales*365 { 82 3 Return on Capital Employed Net profit / Capital Employed * 100- Creditor Days Trade Payables/Cost of Sales*3652 4+ Current Ratio Current Assets/Current 94 Gearing Liabilities Non-current liabilities/ Capital Employed 5 Acid Test Ratio (Current Assets Inventory)/Current Liabilities 10 Interest Covere Operating Profit / Finance Costa Credit sales: Use sales revenue figure for credit sales if no information is provided. +