4QQMN501 Question 2 The following are key extracts from the financial statements and market data of King's Motors PLC and its competitor LSE Motors PLC for financial years ending 31st of December 2020 and 2021: King's Motors PLC 2020 2021 LSE Motors PLC 2020 2021 Revenue Gross Profit 26,000,000 132,000,000 Revenue Operating Profit Interest Expense Profit for The Year Trade Receivables Inventories Cash Trade Payable Long term Loan 15,000,000 80,000,000 (35,000,000) 12,000,000 (2,000,000) (8,000,000) (37,000,000) 4,000,000 Gross Profit Operating Profit Interest Expense Profit for The Year 900,000,000 950,000,000 300,000,000 320,000,000 120,000,000 160,000,000 (20,000,000) (30,000,000) 100,000,000 130,000,000 3,000,000 19,000,000 5,000,000 12,000,000 Trade Receivables 36,000,000 60,000,000 5,000,000 18,000,000 4,000,000 35,000,000 Inventories Cash Trade Payable Share Capital (10) Retained Earnings 5,000,000 7,000,000 25,000,000 11,000,000 Long term Loan Share Capital (100) Retained Earnings 25,000,000 30,000,000 80,000,000 90,000,000 50,000,000 60,000,000 120,000,000 150,000,000 250,000,000 400,000,000 250,000,000 300,000,000 200,000,000 285,000,000 Dividends (Total Payout) Share Price (per share) Cash from operations 0 20 2,000,000 0 100 6,000,000 Dividends (Total Payout) Share Price (per share) Cash from operations 30,000,000 45,000,000 670 650 (35,000,000) (50,000,000) a) Discuss three financial ratios you might consider if you were a supplier to King's Motors Ltd and they asked for 10,000,000 of purchases on credit in 2021. Please ensure to justify your chosen ratios and state whether you agree to this deal? Please ensure in your answers to make clear what insights can be drawn from each of your chosen ratios. Please also discuss what further information you would request from or about King's Motors PLC's before offering your product or services on credit? (10 marks) b) Ensuring your answer is different to the ratios used in answer to part a, assume the role of a management consultant and suggest at least two improvements you would advise King's Motors makes to its business based upon conducting ratio analysis. Please in your answer ensure to justify why you believe your chosen recommendations are important. Please also discuss what further information you would request from or about King's Motors to support you in your recommendations. (10 marks) c) Adopting the perspective of a financial analyst, evaluate the performance of King's Motors PLC and its biggest competitor LSE Motors PLC. Please advise on which of the two companies you would invest in given the information above and why? Please state your rationale behind your chosen investment. In your answer, please also discuss what further information you might seek to support your decision. (10 marks)