FIN3702 CONFIDENTIAL October/November 2022 SECTION B: ESSAY TYPE QUESTIONS [40 MARKS] QUESTION 1 [20 marks] Sibusiso Investments Lid is trying to assess the competitive advantage of three companies within its industry and would like you to evaluate the working capital financing policies of these companies. As the analyst, you have been provided with an extract of financial items for each of the companies as indicated in the Table 1 below. FINANCIAL STATEMENT INFORMATION FOR COMPANIES A, C AND M DATA AS AT THE END OF COMPANY | COMPANY COMPANY FINANCIAL YEAR A C M Temporary current assets 200 000 200 000 200 000 Permanent current assets 400 000 400 000 400 000 Fixed assets 600 000 600 000 600 000 Total assets 1 200 000 1 200 000 1 200 000 Current liabilities 300 000 100 000 200 000 Long-term debt 300 000 500 000 400 000 Shareholders' equity 600 000 600 000 600 000 Total liabilities and equity 1 200 000 1 200 000 1 200 000 Net income for the year 126 000 114 000 120 000 Total debt to total assets ratio 50% 50% 50% Ratio 1 Ratio 2 ? Ratio 3 REQUIRED 1.1 Using the information provided in the table 1 above, identify and calculate the three APPROPRIATE financial ratios (ratios 1, 2 and 3) which you could use to determine the working capital financing policies of these companies. Use the space provided below for your preliminary calculations and fill in these financial ratios in Table 2 below. (Assume 365 days per year). (6) PRELIMANARY CALCULATIONS Page 11 of 21FIN3702 CONFIDENTIAL October/November 2022 1.2 Using the information you obtained in 1.1 above, determine, with reasons, which of the companies above is applying an aggressive working capital financing approach (4) 1.3 Using the information you obtained in 1.1 above, determine, with reasons, which of the companies above is applying a conservative working capital financing approach (4) Page 13 of 21