Please answer Question a.

Pete Sandstrom is the CEO of WeRHere4U Ltd. He is speaking with you having shown you these financial statements for the years 2016 through 2019. He is extremely proud of his results; Net profit has steadily increased from $67,200 in 2017 to $73,500 in 2018 and in 2019, $83,300. He also highlights to you that the Return on Equity (ROE) at WeRHere4U Ltd has also improved substantially form 51% in 2017 to 62% in 2019. He is hoping that when these results are presented to the shareholders of WeRHere4U that he will be rewarded with a substantial bonus for all his good efforts. You decide to take a closer look at the performance of WeRHere4U using the techniques you have learnt in ACCT1101 by considering each of the questions below. The following are extracts from WerHere4U's financial statements. You decide to assess how well WeRHere4U is managing their Sales on credit and Purchases of Inventory on credit. To do this you compute the necessary ratios using average balances where required. WeRHere4U Ltd Extract from the Statement of Financial Performance 2019 2018 2017 $ $ $ Sales 370,000 310,000 270,000 Cost of Sales 174,000 140.000 116,000 Gross Profit 196,000 170,000 154,000 WeRHere4U Ltd Extract from the Comparative Statements of Financial Position 2019 2018 2017 2016 $ $ $ $ Current Assets Accounts receivable 62,000 41,000 31,000 29,000 Inventory 18,000 15,000 17,000 18,000 Other current assets 30,000 16,000 14,000 10,000 Total Current Assets 110.000 72.000 62.000 57.000 Other Information: . All Sales at WerHere4U Ltd to customers are made on credit. All Inventory at WeRHere4U Ltd is purchased form suppliers using trade credit. Required: (a) What is your assessment of the success with which WeRHere4U is managing this aspect of their business? Can you see any possible future problems from your analysis. Explain, using your ratio computations to support your answer. [Maximum 200 words] (6 marks)