Please answer this question with the information provided below

Given your answers and analysis in Questions $1$ to $4,$ what is your final recommendation to the Business Loans

Manager of Concorde Banking Corporation: an approval or denial of the loan to each and$/$or both firms? Discuss

the basis for your recommendation. Ensure you base your recommendation only on the change in the ratios for

the two stated financial years $($i$.$e$.,2022$ and $2023).$

Note: Identify logical connections and use evidence to create well$-$formulated ideas and arguments. This question requires you to synthesise the analyses from questions $1-4$ to formulate a well$-$justified

argument$/$conclusion$,$ which is both logical and critical

Q$1.$

Excelsior $2022-2023$

Excelsiors liquidity improved slightly from $2022$ to $2023$ based on the current ratio. In $2022,$ for every $$1$ current liabilities there were $$3\mathrm{.}62$ in current assets. This then increased to $$4\mathrm{.}7$ in $2023.$ The increase in the ratio stems from the overall increase in current assets during this time period from $$64\mathrm{.}69$ million to $$66\mathrm{.}86$ million, the increases are mainly from Cash, receivables and inventory. Concurrently, liabilities also decreased from $$17\mathrm{.}86$ million to $$14\mathrm{.}23$ million, suggesting a reduction in short term debt and payables.

Inventory can at times have a long lead time for its convertibility to cash thus the quick ratio which excludes inventory is necessary to further clarify the liquidity. In $2022,$ the quick ratio was $2\mathrm{.}09,$ this increased to $3\mathrm{.}09$ in $2023,$ the main reason for this being that the Inventory levels decreased resulting in the change.

Overall, the company is a strong Liquidity position and has improved year on year, thanks to prudent management practices and a healthy balance sheet.

Baby Bunting Group liquidity $2022-2023$

BBN liquidity position during the time period was significantly weaker as evidenced by the current ratio for $2022$ at $1\mathrm{.}26$ and in $2023$ decreasing slightly to $1\mathrm{.}2.$ This can be mainly attributed to the decline in assets from $$119\mathrm{.}753$ million to $$110\mathrm{.}958$ million. The quick ratio also decreased from $0\mathrm{.}24$ to $0\mathrm{.}14,$ largely in part due to the unsold inventory that rolled over into $2023.$ Both ratios at quite a low level suggest that the company from a liquidity standpoint is in quite a poor situation.

Q$2.$

Excelsior $2022-2023$

Over $2022,$ Excelsior received a gross profit margin of $20\mathrm{.}7\%.$ This is compared to a total of $27\mathrm{.}4\%$ in $2023$ demonstrating a positive decline in expenses. This underlines how management of expenses has improved over the year signalling the firm's commitment to controlling costs. $2022$ saw Excelsior gain a $12\mathrm{.}3\%$ operations margin compared to $13\mathrm{.}5\%$ in $2023.$ Subsequently, this indicates Excelsior made a slight increase of $1\mathrm{.}3\%$ from $$0\mathrm{.}12$ to $$0\mathrm{.}13$ of profit after production and operation costs. Notably, we can analyse this improvement through the firm's dedication in maintaining production costs evident through sales increasing faster than costs which highlights their efficient budgeting. Excelsior's net profit also increased throughout the $2$ years expanding from $8\mathrm{.}56\%$ to $9\mathrm{.}85\%$ respectively. Extending from this, an increase from $$0\mathrm{.}0856$ to $$0\mathrm{.}0985$ was generated for every dollar of sales made, largely reflective of the profound approx. $$3\mathrm{.}1$ million dollar increase in sales, indicating the firm's strong pricing management.

Baby Bunting Group $2022-2023$

Comparatively, during the $2022$ financial year, BBG demonstrated a gross profit margin of $38\mathrm{.}6\%$ in vs a decrease of $37\mathrm{.}4\%$ the following year. Interestingly, although BBG made an adequate improvement in both gross profit and sales, their gpm fell. This could result from the firm's COGS being too high, indicating a lack of control in maintaining production costs. This is furthered observing BBG$\text{'}$s operating profit margin for $2022$ which sat at $7\mathrm{.}9\%$ compared to $2023$ seeing a decrease to $5\mathrm{.}5\%.$ This again entails that the firms operating costs are increasing yearly showcasing a lack of efficiency and an indication that operations should be addressed. Subsequently, BBG$\text{'}$s net profit margin in $2022$ showed $4\mathrm{.}8\%,$ falling to $2\mathrm{.}8\%$ the following year. A lower percentage in net profit could represent a firm's shortcomings in a few ways one major being a sign of poor inefficient management which can lead to fruitless cost structure and pricing strategies.

Q$3.$

Excelsior $2022-2023$

Debt ratio: $24\mathrm{.}23\%(2022)$; $18\mathrm{.}19\%(2023)$

Debt$-$to$-$equity ratio: $0\mathrm{.}32$ times $(2022)$ ; $0\mathrm{.}22$ times $(2023)$

Source of finance for Excelsior Capital Ltd and Baby Bunting Group in $2022$ and $2023$ is illustrate through debt ratio and debt$-$to$-$equity ratio.

Excelsior enterprise experienced a decrease in debt ratio from $24\mathrm{.}23\%$ in $2022$ to $18\mathrm{.}19\%$ in $2023.$ Thus, ECL did not have a tendency to rely on borrowing to pay their assets or even company's activities, which could lead to lower financial risk. In additionally, the debt$-$to$-$equity ratio's Excelsior Capital Ltd was $0\mathrm{.}32$ times in $2022$ and reduced slightly by $0\mathrm{.}1$ times compared with that