Campers Ltd was established in 2010 and have had impressive returns for the years preceding COVID-19. After going into the reserves to keep the business afloat, they have had to develop new strategies. The board has approved an initiative that requires the company to take a R50 million loan.

(Information extracted from their Balance Sheet) Total Assets R50 million Total Liabilities R 40 million

(Information extracted from the Income Statement) Bank account R25 million Rental R5 million (per annum) Utilities (fibre, telephone, water and electricity, security) R1 millionSalaries -R15 million

Question,,,,Apply the solvency and liquidity test and advise whether or not the board the board was correct in instructing that the company take a loan for R50 million. In your answer:

(i)explain the test and what it involves;

(ii)calculate the financial position of the company, based on the figures provided above; and

(iii)provide an opinion on the correctness of the boards decision.