AVANCED DIPLOMA IN FINANCIAL MANAGEMENT - ACADEMIC AND ASSESSMENT CALENDAR DISTANCE 4.2 SHORT-TERM FINANCIAL MANAGEMENT QUESTION ONE [30] Netforce Security (Pty) Ltd Balance Sheets for 2018 and 2017 financial years are below. Assets Non Current/Fixed Inventory Receivables Cash 2018 7 000 000 500 000 450 000 650 000 8 600 000 2017 6 000 000 300 000 420 000 80 000 6 800 000 Equity and Liabilities Share Capital (R2 shares) Share premium Retained Income Long term Debt Payables 5 000 000 200 000 700 000 2 000 000 700 000 8 600 000 4 400 000 100 000 400 000 1 000 000 900 000 6 800 000 The abbreviated Income Statement for the year ended 28 February 2018: Sales (50% on credit) 3 000 000 Cost of sales (80% on credit) 2 000 000 Depreciation 120 000 Interest Expense 80 000 Net Income before Tax 900 000 Dividends 330 000 Retained Income 300 000 VANCED DIPLOMA IN FINANCIAL MANAGEMENT - ACADEMIC AND ASSESSMENT CALENDAR DISTANCE Required: Calculate the following ratios for 2018 and comment. Ratios for 2017 are given in brackets. 1.1.1. Current ratio (0,89:1) 1.1.2. Acid test ratio (0,56:1) 1.1.3. The debtors collection period (81 days) [all debtors are on 60 days accounts] (4) 1.2. Calculate the accounts payable period (in days), noting that Netforce Ltd has, after tough negotiations secured a 90 day account with all its creditors. (4) Note: Use average accounts payable for this calculation. 1.2.1. Is this an ideal situation? Offer constructive advice to Netforce Traders. (4) 1.3. Comment in detail on the liquidity of the company. (12)