4 (30 MARKS) Sino Irish is a public listed travelling company. Its summarized financial statements for the year ended 31 December 2021 (and comparative 2020) are given below. Statement of Profit or Loss and Other Comprehensive Income for the years ended Revenue Cost of sales Gross Profit Distribution expenses Administrative expenses Investment Income Finance costs Profit/(loss) before taxation Income tax (expense) relief Profit/(loss) for the year 31 December 2021 RM'000 2020 RM'000 29,500 36,000 (25,500) (26,000) 4,000 10,000 (1,050) (800) (4,900) (3,900) 50 200 (600) (500) (2500) 5,000 400 (1,500) (2,100) 3,500 Statement of Financial Position as at 31 December 2021 RM'000 2021 RM'000 2020 RM'000 2020 RM'000 Non-current assets Property, plant and equipment 17,600 24,500 Investments at fair value through 2,400 4,000 profit and loss 20,000 28,500 Current assets Inventory and work-in-progress 2,200 1,900 Trade Receivables 2,200 2,800 Tax 600 Nil Bank 1,200 6,200 100 4,800 Total assets 26,200 33,300 Equity and Liabilities Equity share capital 14,000 12,000 Revaluation Reserve Nil 4,500 Retained earnings 3,600 6,500 17,600 23,000 Non-current liabilities Bank loan 4,000 5,000 Deferred tax 1,200 700 Current liabilities Trade payables Current tax payable Total equity and liabilities Number of equity shares 3,400 2,800 Nil 3,400 1,800 4,600 26,200 33,300 3,000,000 12,000,000 The following are excerpts from the board of director's statement and the notes to the financial statements: 1. The company's portfolio of investments at fair value through profit or loss has been "marked to market" (fair valued) resulting in a loss of RM1.6 million (included administrative expenses). 2. 3. There were no additionals or disposals of non-current assets during the year. Despite the above events and associated costs, the board of directors believes that the company's underlying performance has been quite resilient in these difficult times. Required: a. Analyse and discuss the financial performance and position of Sino Irish as portrayed in the above financial statements. Support your analysis with the calculation of the following ratios for the years 2020 and 2021: i. gross profit ii. current ratio 111. account receivables turnover in days 1V. inventory turnover in days V. return on capital employed b. Briefly explain FOUR (4) limitations of financial analysis. (12 marks) (8 marks) c. Financial analysis has been used extensively by researchers and practitioners in assessing the possible occurrence of misleading or fraudulent financial reporting due to creative accounting or earning management. Recommend FIVE (5) strategies that can be used to limit/reduce the negative impact of creative accounting and earning management. (10 marks)