Karak Manufacturing Company produces and sells different types of Air Conditioning since 2001. The following information related to company's financial statements for 2020:

Karak Manufacturing Company / Income Statement 31/12/2020
Sales Revenues	JOD 929,000
Cost of Goods Sold	JOD 723,000
Gross Profit	JOD 206,000
Other Expenses	JOD 19,000
EBIT	JOD 187,000
Interest Expenses	JOD 14,000
EBT	JOD 173,000
Tax	JOD 60,550
Net Income	JOD 112,450
Addition to Retained Earnings	70%

Karak Manufacturing Company / Balance Sheet 31/12/2020
Assets		Liabilities & Owners' Equity
Cash	JOD 25,300	Notes payables	JOD 17,000
Accounts receivables	JOD 40,700	Accounts payables	JOD 68,000
Inventory	JOD 86,900	Long term debt	JOD 158,000
Net fixed assets	JOD 413,000	Common stocks	JOD 140,000
		Retained earnings	JOD 182,900
Total assets	JOD 565,900	Total liabilities & O.E	JOD 565,900

The General Manager (GM) of the company was studying the current financial statements in order to plan for year 2021. The GM projected that sales will grow by 20% next year. The GM of the company could not determine if the company needs extra financing, so he asked you (as a Financial Director) to:

1. Prepare Pro Forma financial statements, knowing that the tax rate and the dividend payout rate will remain constant. Costs, other expenses, current assets, and accounts payable will increase naturally with sales. (6 Marks)

2. Determine the external financing needed to support the 20% growth rate knowing that the company was operating at full capacity and no new debt or equity was issued. (4 Marks)

Question 3:

The following information were extracted from Amman Company Ltd. financial statements for two years (2019 and 2020):

Financial Information	31/12/2019	31/12/2020
Revenues	JOD 32,000	JOD 45,000
Profit after tax	JOD 1,600	JOD 1,550
Total current assets	JOD 5,600	JOD 4,400
Total current liabilities	JOD 2,900	JOD 5,100
Inventory	JOD 2,750	JOD 5,100
Accounts receivables	JOD 200	JOD 100
Cash	JOD (500)	JOD 1,550
Accounts payables	JOD 1,500	JOD 3,500
Tax due (unpaid)	JOD 1,400	JOD 1,100

Amman Company Ltd. is operating in the Retail Sector. Moreover, the company opened a third store during 2020.

The Chief Executive Officer (CEO) of the company has asked you as a Financial Manager to analyze the liquidity of the company in as much detail as the information permits. After a week, the Financial Manager has reported the following to the CEO:

• The company's current liquidity is inadequate in years 2019 and 2020.
• The quick ratio has also declined indicating a poor indicator.
• Overall, the liquidity of Amman Company Ltd is terrible.

The CEO was not happy with the report, so he hired a senior financial analyst from Agile Investment Services to analyze professionally company's liquidity.

Required:

As a senior financial analyst at Agile Investment Services, you are required to:

1. Evaluate Company's current ratio and quick ratio. (4 Marks)

2. Provide CEO with a professional concrete analysis on company's liquidity with possible reasons and recommendations. (6 Marks)