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Part A: You have been given some financial ratios for Mighty Furniture Limited for the last three years as shown below: Ratios 2018 2019 2020
Part A: You have been given some financial ratios for Mighty Furniture Limited for the last three years as shown below: Ratios 2018 2019 2020 a. Gross profit % 40% 35% 30% b. Net profit % 12% 9% 6% 35 days 50 days 62 days C. Inventory Turnover period 32 days 40 days 60 days d. Average settlement period for Accounts receivable e. Current ratio 7:1 5:1 3:1 2.3:1 1.5:1 1.1:1 f. Quick asset ratio Required: a. Using the ratios above, assess the profitability, liquidity and efficiency of Mighty Furniture for the last three years (2018 to 2020) and identify the causal factors. (6 marks) b. Suggest two recommendations to the management to address any adverse trends (where applicable) in profitability, liquidity and efficiency of the business. (4 marks)
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