1 Question 5: [35 marks] You are preparing for a board meeting obtain at Yellow Wood Ltd and obtain the following financial statements. Statement of Comprehensive Income for the period ending 29 February 2020 Feb-18 Feb-19 Feb-20 R'000 R'000 R'000 Sales (revenue) 127,337 129,438 133,848 Cost of Sales 97,641 99,500 105,450 Gross profit 29,696 32,932 28,398 Expenses 18,443 18,913 19,053 Earnings before interest and 11,253 14,019 9,345 tax (EBIT) (Operating profit) Interest 551 575 550 Profit before tax (PBT) 10,702 13,444 8,795 Tax 2,997 3,764 2,463 Profit after tax 7,705 9,680 6,332 Dividends 500 500 500 Feb-20 R'000 Statement of Financial Position as at 29 February 2020 Feb-18 Feb-19 R'000 R'000 Assets: Non-current assets 14,378 20,374 Property, plant and equipment 12,800 17,924 Motor vehicles 1,578 1,450 25,000 21,700 1,300 0 1,000 2,000 Investment in Blue Gum Tree investments Current Assets: 40,024 14,993 Inventory Trade receivables Cash And bank 34,410 12,038 21,630 742 41,284 15,890 22,002 3,392 23.051 1,980 Total Assets 48,788 60,398 66,284 Equity and Liabilities Equity Ordinary shares - 1,000,000 22,055 13,500 31,235 13,500 37,067 13,500 Retained income 8,555 17,735 23,567 Non-Current Liabilities: Long term loan Bonds 17,103 15,603 1,500 17,168 16,168 1,000 15,350 14,500 850 Current Liabilities: Trade Creditors 9,630 11,995 13,867 Total Equity and Liabilities 48,788 60,398 66,284 Required: 5.1 Discuss the profitability of Yellow Wood Ltd. (25) 5.2 Discuss the liquidity of Yellow Wood Ltd (10) (Note, make use of ratio analysis and horizontal analysis to support your answer. Marks will be awarded for calculations)