XXX Ltd is a manufacturer, which was established 30 years ago. It has very good relationships with both its clients and suppliers. However, its clients have been badly affected by the economic recession these two years. XXX Ltd. has been asked by its clients to allow longer credit terms, increasing from 8 months to a year. Recently, XXX Ltd. applied for a 1 million 2-year loan from your bank. You are the loan officer and are provided with the following financial ratios. Discuss all the appropriate concerns about the borrowing firm.

Table 1 Financial Ratios of XXX Ltd.
Time	2017	2018	2019	2020	2021
Current Ratio 1	2.12	1.97	2.06	1.99	1.18
Acid Test 1	0.84	0.96	1.20	1.38	0.80
Credit Given (days)	156.99	222.11	237.28	267.54	344.04
Credit Taken (days)	148.80	148.28	240.77	233.76	305.08
Gross margin	38.28%	35.09%	36.52%	37.87%	15.21%
Net margin	13.98%	17.85%	14.53%	13.09%	6.23%
Interest Cover (times)	13.50	16.22	12.60	12.20	5.67
D/E ratio	33%	29%	30%	31%	32%
Net working assets to sales %	131%	127%	130%	127%	67%
Table 2 Financial Ratios in the industry of XXX Ltd.
	2017	2018	2019	2020	2021
Current Ratio 1 to	1.96	1.39	1.32	1.21	1.25
Acid Test 1 to	0.8	0.89	0.92	1.01	0.96
Credit Given (days)	213.28	228.03	241.61	258.31	305.42
Credit Taken (days)	150.43	169.65	172.98	183.76	278.65
Gross margin	12.00%	11.60%	13.30%	15.20%	14.14%
Net margin	8.90%	9.20%	12.50%	10.70%	5.53%
Interest Cover (times)	3.52	3.65	4.02	5.21	4.8
D/E	35%	37%	36%	39%	39%
Net working assets to sales %	88%	77%	56%	36%	35%