4QQMN501 Question 2 The following are key extracts from the financial statements and market data of Kingsla Motors PLC and its biggest competitor LSE Motors PLC for financial years ending 31" of December 2019: Kingsla Motors PLC LSE Motors PLC E E Revenue 120,000,000 Revenue 150,000,000 Gross Profit 60,000,000 Gross Profit 30,000,000 Operating Profit 12,000,000 Operating Profit 20,000,000 Interest Expense (2,000,000) Interest Expense (8,000,000) Profit for The Year 10,000,000 Profit for The Year 12,000,000 Trade Receivables 40,000,000 Trade Receivables 6,000,000 Inventories 20,000,000 Inventories 12,000,000 Cash 1,000,000 Cash 6,000,000 Trade Payable 5,000,000 Trade Payable 5,000,000 Long term Loan 20,000,00 Long term Loan 10,000,000 Share Capital (E100) 5,000,000 Share Capital (E1) 20,000,000 Retained Earnings 15,000,000 Reserves 10,000,000 Dividends (Total Payout) 2,000,000 Dividends (Total Payout) 14,000,000 Share Price (per share) 250 Share Price (per share) 20 Cash from operations 6,000,000 Cash from operations 6,000,000 a) Discuss three financial ratios a bank might use when seeking to decide how much to lend Kingsla Motors PLC. Ensure in your answers to make clear what insights can be drawn from each of your chosen ratios. (8 marks) b) Discuss why financial and investment ratios are so widely used by decision-makers of financial statements. In your answer, please discuss both the advantages and disadvantages of using ratios. (8 marks) C) Adopting the perspective of a financial analyst, evaluate the performance of Kingsla Motors PLC and its biggest competitor LSE Motors PLC. Please advise on which of the two companies you would invest in given only the information above. (14 marks) Total marks for Question 2 (30 marks) See Next Page 4QQMN501 Question 2 The following are key extracts from the financial statements and market data of Kingsla Motors PLC and its biggest competitor LSE Motors PLC for financial years ending 31" of December 2019: Kingsla Motors PLC LSE Motors PLC E E Revenue 120,000,000 Revenue 150,000,000 Gross Profit 60,000,000 Gross Profit 30,000,000 Operating Profit 12,000,000 Operating Profit 20,000,000 Interest Expense (2,000,000) Interest Expense (8,000,000) Profit for The Year 10,000,000 Profit for The Year 12,000,000 Trade Receivables 40,000,000 Trade Receivables 6,000,000 Inventories 20,000,000 Inventories 12,000,000 Cash 1,000,000 Cash 6,000,000 Trade Payable 5,000,000 Trade Payable 5,000,000 Long term Loan 20,000,00 Long term Loan 10,000,000 Share Capital (E100) 5,000,000 Share Capital (E1) 20,000,000 Retained Earnings 15,000,000 Reserves 10,000,000 Dividends (Total Payout) 2,000,000 Dividends (Total Payout) 14,000,000 Share Price (per share) 250 Share Price (per share) 20 Cash from operations 6,000,000 Cash from operations 6,000,000 a) Discuss three financial ratios a bank might use when seeking to decide how much to lend Kingsla Motors PLC. Ensure in your answers to make clear what insights can be drawn from each of your chosen ratios. (8 marks) b) Discuss why financial and investment ratios are so widely used by decision-makers of financial statements. In your answer, please discuss both the advantages and disadvantages of using ratios. (8 marks) C) Adopting the perspective of a financial analyst, evaluate the performance of Kingsla Motors PLC and its biggest competitor LSE Motors PLC. Please advise on which of the two companies you would invest in given only the information above. (14 marks) Total marks for Question 2 (30 marks) See Next Page