PART A

The following data which are based on the research conducted by Deakin $(1972)$ present the means of several financial statement items for a sample of $32$ failed companies and a matched sample of $32$ non$-$failed companies. A company was defined as failed if it experienced bankruptcy, insolvency, or was otherwise liquidated for the benefit of creditors during a five$-$year period. Each failed company was matched with a non$-$failed company on the basis of industry classification, calendar year and asset size as of five years prior to failure. The data present mean financial statement items for each of the five years prior to the bankruptcy, insolvency or liquidation.

Mean Financial Items of Failed and Non$-$Failed Companies $($R$\text{'}000)$

PANEL A$.$ FAILED COMPANIES

$\backslash$table$[[,$Years before failure,,$],[$Financial item,$5,4,3,2,1,,],[$Statement of financial position data,$753,1020,730,511,329,,],[1.$ Cash and marketable securities$,1845,3164,3563,2359,2090,,],[2.$ Accounts receivable,$2827,6064,7390,2525,2378,,],[3.$ Inventories,$3937,7018,8332,5107,5229,,],[4.$ Other assets,$9362,17266,20015,10502,10026,,],[5.$ Total assets,$3780,4820,8092,6102,6860,,],[6.$ Current liabilities,$2149,8617,9784,3537,3408,,],[7.$ Other liabilities,$3433,3829,2139,863,-242,,],[8.$ Equity,$9362,17266,20015,10502,10026,,],[9.$ Liabilities and equity,$],[$Statement of comprehensive income and cash flow data,,,,,,,$],[10.$ Sales,$16508,15425,18259,16656,16938,,],[11.$ Net income,$65,-29,-664,-858,-1309,,],[12.$ Cash flow,$145,308,-244,-518,-909,,]]$

$8$

PANEL B$.$ NON$-$FAILED COMPANIES

$\backslash$table$[[,$Years before failure,,$],[$Financial item,$5,4,3,2,1,,],[$Statement of financial position data,$981,1086,1107,1304,1365,,],[1.$ Cash and marketable securities$,1716,1730,1837,2146,2358,,],[2.$ Accounts receivable,$3022,3000,3006,3479,3974,,],[3.$ Inventories,$3678,3995,4225,5243,5565,,],[4.$ Other assets,$9397,9811,10175,12172,13262,,],[5.$ Total assets,$2023,2251,2370,2920,3305,,],[6.$ Current liabilities,$2169,2432,2479,2826,3800,,],[7.$ Other liabilities,$5205,5128,5326,6426,6157,,],[8.$ Equity,$9397,9811,10175,12172,13262,,],[9.$ Liabilities and equity,$],[$Statement of comprehensive income and cash flow data,,,,,,,$],[10.$ Sales,$16989,16395,17610,20445,22426,,],[11.$ Net income,$206,46,211,426,480,,],[12.$ Cash flow,$523,381,577,865,941,,]]$

REQUIRED:

Use the data in Panel A and Panel $B$ to present the following ratios in graphical format for the failed and non$-$failed companies:

Current ratio

Acid test $/$ Quick ratio

Debt ratio

Net profit percentage

Total asset turnover ratio

Briefly discuss which financial ratios exhibit the most differential behaviour for the failed and non$-$failed companies in the five$-$year period prior to failure?

PART B

Select any company of your choice listed on the Johannesburg Stock Exchange. Using the company's financial statements $($covering five financial periods$)$ you are required to:

Calculate the following ratios $($for the financial years ending $2019-2023$:

Current ratio

Acid test $/$ Quick ratio

Debt ratio

Net profit percentage

Total asset turnover ratio

Use a graphical approach to compare the ratios of your selected company to those in Part A above $($failed and non$-$failed companies$).$ Briefly discuss whether the ratios for your selected company resembleBy