Mr. Wong: That is it! Have you ever thought about that a company can perform "badly" in the current year because it is expecting more than enough compensation for future years? Mr. Chan:I know what is trend analysis, as I have studied courses on financial reporting and analysis before. But I still think that even if a corporation is giving up some current returns for the future, management of that corporation should not allow the corporation to reach the brink of insolvency. Am I correct? Mr. Wong: And you are accusing me that I risk my own corporation to the brink of insolvency. I can assure that my corporation will not have any liquidity problem at all. Mr. Chan: First I must say that I have never intended to say that your corporation has experienced liquidity problem. Then, Mr. Wong, I would like you to explain why the liquidity ratios of your corporation are quite unacceptable in accordance with the general prescriptions of the financial analysis texts. For example, current ratio for the present year is just 1.3. Is there any serious problem? Mr. Wong: What is wrong with a current ratio of 1.3? I cannot see anything wrong at all. Tell me why you think 1.3 is not acceptable for my corporation. Remember, our accounts have been audited by a Big Four Firm, and we have obtained the auditors' opinion that our accounts show a true and fair view and there is no reservation from the auditors. Mr. Chan: Yes, I know. But personally I do not think that the report is perfectly "true and fair". Anyhow, this is beyond the scope of my interview. Thank you, Mr. Wong. Thanks for your kindness in accepting my interview. Have a nice day. You are required to: A. Identify the various issues of financial reporting and analysis as mentioned in the dialogue between the finance editor and the chairman of the company. (25 Marks) (Note: You are NOT required to comment on any of these issues for this part of the question alone.) B. Choose just one issue that you have identified in (A) above, and comment to what extent you agree with Mr. Chan, the editor, or Mr. Wong, the chairman. (25 Marks)