Evaluate the performanceof the business in relation to liquidity. recommend and justify a short term solution to the problem of the bank draft

17 The directors of Cass Ltd have become increasingly concerned about the liquidity position of the company. In order to assess the performance of the business, the accountant has calculated ratios for the current year together with those of the previous three years. These are shown below. Year ended 31 December Ratio 2017 2016 2015 2014 Gross profit % 35% 33% 30% 28% Profit in relation to revenue % 10% 12% 14% 14% Current ratio 1.2:1 1.5:1 2:1 2.4:1 Liquid capital ratio 0.4:1 0.8:1 1.4:1 1.9:1 Trade receivable days 62 56 45 45 Trade payable days 30 35 40 45 Additional information The company offers its customers 30 days credit. The company is given 30 days credit by its suppliers. The directors have identified that there will be a problem with the company's overdraft. The company has an agreed overdraft facility of 80 000 and the bank is unwilling to increase this. The forecast bank balance on 30 June 2018 is 85 000 overdrawn. The directors' believe that the problem of the bank overdraft will be temporary as they have signed a contract which will increase sales by 20%. The contract will commence on 1 September 2018