Ali and Bashir are chartered accountants and have been working as Managing Director (MD) and Chief Financial Officer (CFO) in a listed company. In a recent meeting of the Board, the directors have decided to expand the business within six months by opening 20 retail outlets. This expansion would require financing of Rs. 300 million which may be arranged through bank loan. The following information has been extracted from latest draft financial statements of the company: Rs. in 000 Sales 1,700 Gross profit 545 Tax expense 23 Profit after tax 40 Total assets 2,500 Non-current assets 900 Inventories 850 Trade receivables 600 Share capital 800 Reserves 152 Long term debt @ 9% 750 Following additional information is also available: 1. 80% of the sales are on credit. 2. Opening inventory was Rs. 100 million. 3. 40% of current liabilities comprise of trade payables. MD has advised the CFO to arrange the loan from MN Bank. He has also informed that the President of the bank is his good friend and the loan can be arranged on a fast track basis at a mark-up of 15% per annum, subject to the following conditions: 1. current ratio and quick ratio should be at least 2:1 and 1:1 respectively; 2. gearing ratio should not exceed 40%; and 3. Interest cover should be at least 3. CFO is not comfortable with this deal as the mark-up offered by the bank is much higher than the rate on the existing loan and it is difficult for the company to meet the gearing requirements of the bank. However, MD has asked him to make certain changes in the draft financial statements before submission to the bank; which according to the CFO are not in accordance with the IFRSs. Required: (a) Compute liquidity, working capital and debt ratios of the company. (10) (b) What Are The Major Constraints On Relevant And Reliable Financial Statements? (05) (c) Discuss the major findings of your class project on NESTLE Pakistan.