Maju Berhad is a large manufacturing company specialising in the manufacture of a wide range of sports clothing and equipment. The company did not issue any common or preferred stock during the year 2019.The interest rate on the bond payable was 8% and the income tax rate was 40%.Maju Berhad has approached OCBC Bank requesting a RM300,000 business loan to strengthen the cashflow and to pay certain pressing short-term obligations. The followings are the comparative financial statements of Maju Berhad for the financial year ending 31 December 2019: Maju Berhad Statement of Financial Position as at 31st December 2019RM ('000)RM ('000)20192018 Non-current Assets:Buildings and Equipment, net1,9401,830Current Assets:Inventory1,300800 Accounts receivable, net650400 Cash and cash equivalents90200 Marketable securities050 Prepaid expenses20202,0601,470 Total assets4,0003,300Equity and LiabilitiesCurrent liabilities1,100600 Non-current Liabilities:Bond payable, 12%750750 Total liabilities1,8501,350Equity:Common stock, RM10 par500500 Preferred stock, RM50 par200200 Retained earnings1,4501,250 Total equity2,1501,950 Total equity and liabilities4,0003,300

Maju Berhad Statement of Comprehensive Income for the year ended 31st December 2019RM ('000)RM ('000)20192018Sales revenue7,0006,000 Less: Cost of Goods Sold5,4004,800 Gross profit1,6001,200 Selling and administrative expenses:970710 Net operating income630490 Interest expense9090 Net income before taxes540400 Income taxes216160 Net income324240 Dividend to preferred stockholders1616 Dividend to common stockholders10860 Net income added to retained earnings200164 Retained earnings, beginning of the year1,2501,086 Retained earnings, ending of the year1,4501,250During the previous year, Maju Berhad has expanded the number of product lines in order to stimulate its sales and increase profits. The company also has moved aggressively to acquire new customers.The sales terms are 2/10, n/30, where the payment is due within 30 days and 2% discount will be given if payment received within the 10 days. The accounts receivable at the beginning of 2018 totaled RM350,000 and the beginning inventory at the beginning of 2018 totaled RM720,000.In addition, information given below are the industry averages for the year 2019:Ratio Industry average Current ratio 2.5 times Acid-test ratio 1.2 times Average collection period 18 days Average sale period 50 days Debt-to-equity ratio 0.75 times Times interest earned 6.0 Return on total assets 10% Price-earning ratio 9 times

Required:a. The OCBC Bank is uncertain whether to approve the loan applied by Maju Berhad. In view of this, you are required to calculate the following ratios for both years of 2019 and 2018.i. Working capital ii. Current ratio iii. Acid-test ratio iv. Average collection period v. Average sale period vi. Debt-to-equity ratio vii. Times interest earned viii. Return on total assets ix. Price-earning ratio (18 marks)b. Based on the ratios that you have calculated in (a) above, report to the OCBC Bank to analyse about the problems and strengths of Maju Berhad. (16 marks)c. Provide recommendations as to whether the business loan of Maju Berhad should be approved by the OCBC Bank. (6 marks)