MM Catering Group is now operating five fine dining restaurants in Hong Kong. The group planned to open a new restaurant in year 2023. You are the Financial Director of MM Catering Group that you will be awarded a special bonus if the net income growth could be maintained at 10% in each year, normally. In the middle of 2021, a competitor entered the market targeting similar customers and caused a considerable loss of customers that affected the business performance seriously. Based on the following financial statements (actual of 2021 and forecast of 2022), answer all the questions in this section. (Show your works clearly, and round the figures to one decimal place) MM Catering Group Statements of Comprehensive Income (in dollars) For the Year Ended 31 Dec Sales Cost of goods sold Gross profit Operating Expenses Rent 2022 projected 1,075,000 478,000 2021 actual 1,350,000 580,000 770,000 597,000 82,000 190,000 20,000 16,000 6,000 42,000 86,000 180,000 14,400 14,000 6,000 48,000 Salaries and Wages Miscellaneous Insur ance Depreciation Utilitites Operating income Interest expense Income before income taxes Income taxes Net income 356,000 348,400 414,000 15,200 248,600 12,200 398,800 79,760 236,400 47,280 189,120 319,040 MM Catering Group Statements of Financial Position (in dollars) As at 31 Dec Assets 2021 actual 2022 projected Cash 120,000 140,000 220,000 56,000 536.000 78,000 160,000 180,000 51,000 Inventories Accounts receivable Furniture and equipment Total assets 469.000 Liabilities Accounts payable Long-term bank loan 130,000 130,000 260,000 110,000 95,000 205.000 Total liabilities Shareholders' Equity Common shares Paid-in capital in excess of par Retained earnings 30,000 80,000 166.000 276.000 536.000 30,000 80,000 154,000 264,000 469.000 Total shareholders' equity Total liabilities and shareholders' equity 3. What is the main purpose for preparing the statement of financial position? Why is it important to shareholders? (4 marks) 4. Using horizontal analysis, calculate the percentage changes on the projected sales, rent, and net income of 2022 as compared to the actual of 2021. (6 marks) 5. Analyze and report the result of projected rent and projected net income in year 2022. (4 marks) 6. Based on the analysis result of projected net income, what is the impact on you as the Financial Director of MM Catering Group? (4 marks) MM Catering Group is now required to raise additional capital fund through debt financing. The bank will require its potential clients to meet a series of financial ratios based on their projected financial results of next year in order to determine the eligibility for obtaining the long-term bank loan. 7. With reference to the financial ratios' requirement indicated below by the bank, calculate the following financial ratios for MM Catering Group based on the projected financial result of 2022. (Show all your steps and formulae clearly) (20 marks) Financial Ratios ank Industry Requirement Average 2 35% (a) Net return on assets (b) Net income to revenue (c) Inventory turnover (d) Cost of goods sold percentage (e) Current ratio 2 20% 23 times 4 times < 50% 24.0 4.2 (f) Quick ratio (g) Total assets to total liabilities ratio (h) Debt-to-equity ratio 2 2.0 23.0 3.1