3. Analyse the financial statements that have been prepared by Willen Ltd. In particular, comment on the following aspects of the company: (55 marks in total) Areas of concern in financial performance, . focussing mainly on information from the income statement. (22 marks) Areas of concern in financial health, focussing mainly on ratios dependent on the income statement and the balance sheet. (23 marks) Areas of concern in cash flow management, focussing mainly on information available from the cash flow statement. (10 marks) You will need to calculate a range of ratios and percentage changes and so you should select those ratios and percentage changes that you feel are appropriate to this question to carry out any relevant calculations including those shown in the table below: Main financial ratio calculations: Calculations relating to Financial Performance Revenue (Sales) Growth/Decrease (%) 12021 only) Gross Margin (%) NA Operating Profit Margin (%) Return on Equity (%) [2021 only) Calculations relating to Financial Health Quick Ratio Receivables Collection Period (days) Inventory Turnover Period (days) - Gearing (%) Show the workings out for your calculations and present your answers to one decimal place. State what each calculation might mean if you identify it as an area of concern, i.e. explain why your figures may be of concern to Willen Ltd. It may be that your findings indicate that, in some areas, Willen Ltd is performing well and concern is not warranted. Make sure that you note the most obvious matters of concern - they are not "hidden" or very complex if you undertake some simple, relevant analysis.] Year to 31 Dec 2021 Ek Ek Ek 20,500 Willen Ltd income statements for the years ended 31 December 2021 and 31 December 2020 Income statement Sales revenue Less cost of goods sold: Opening inventory Purchases Year to 31 Dec 2020 Ek 21,479 2,400 2,100 12,800 11,600 15,200 13,700 Less closing inventory 3,700 2,400 Cost of goods sold 11,500 11,300 Gross profit 9,000 10,179 Less expenses: Salaries Rent and insurance 5,500 5,250 700 728 Delivery costs 744 1,323 Marketing and advertising expenses 300 750 Energy and other utilities 224 450 300 2701 Depreciation 110 Accountant's fees 100 7,878 8.871 Total Expenses Operating Profit Less Interest cost Profit before taxation Less Corporation tax Profit after taxation 1,122 1,308 126 72 1,236 996 247 199 989 797 Willen Ltd balance sheets at 31 December 2021 and 31 December 2020 Balance sheet Non-current assets Property and equipment for hire Vehicles Total non-current assets Current assets Inventory 3,700 At 31 December 2021 Ek EX 6,228 300 6,528 2,400 Receivables 1,361 1,497 Cash at bank 120 426 5,181 4,323 Total current assets Current liabilities Payables Corporation tax Total current liabilities. Net current assets/working capital 552 624 199 823 4,358 247 799 At 31 December 2020 Ex 5,465 200 5,665 3,524 Corporation tax Total current liabilities Net current assets/working capital Total assets less current liabilities Long-term liabilities Bank loan Net Assets Equity Share capital Reserve: retained earnings Total Equity 199 823 4,358 10,886 247 799 3,524 9,189 1,800 900 9,086 8.289 7,000 7,000 2,086 1.289 9,086 8,289 Willen Ltd cash flow statement for the years ended 31 December 2021 and 31 December 2020 Cash flow statement Operating activity: Operating profit Corporation tax paid Non-cash expenses: Year to 31 Dec 2021 Ek Year to 31 Dec 2020 1,122 (247) 1,308 (280) 300 270 Depreciation Changes in cash invested in working capital: (Increase)/Decrease in inventory (1,300) (Increase)/Decrease in receivables 136 Increase/(Decrease) in payables 72 Net cash inflow from operating activities 83 Investing activity: Purchase of non-current assets Net cash outflow from investing activities (300) (215) 50 833 (1.163) (775) (1,163) (775) Financing activity Bank loan 900 (126) (72) Interest paid on bank loan: Net cash outflow generated by financing activities 774 (72) (306) 14) Change in cash balances 440 426 Opening cash balance at 1st January 426 120 Closing cash balance at 31st December