Polygon Ltd Balance Sheet as at 31 December 2016 RM000 RM'000 Current assets Cash 204 Debtors 760 Inventory 500 1,464 Non-current assets 1,860 Total assets 3,324 600 Current liabilities Creditors Non-current liabilities Bank loan Shareholders' equity Paid-up capital (issued at RM1) Retained profits 600 1,000 1,124 2,124 3,324 Total liabilities and shareholders' equity Other important information are as follows: The company offers credit term to the main traders of the company (83% of the total sales). The company received only cash term from individual buyers (17%). The company purchased inventory of RM2,000,000 on credit term during the year. The closing debtors for the year has increased by 150% compared to the opening balance. The closing creditors for the year has increased by 50% compared to the opening balance. The opening inventory is 4/5 of the closing inventory for the year. a. Based on the information given above, calculate and show your working for the financial ratios of 2016. (6 marks) i. Average settlement period for debtors Average settlement period x 365 Average trade debtors Credit sales ii. Average settlement period for creditors Average settlement period = x 365 Average trade creditors Credit purchases iii. Average inventory turnover period Average inventory turnover periods x 365 Average inventory held Cost of sales b. Polygon Ltd is supplying a substantial amount of goods on usual credit terms to JJ Trading, its main purchaser. If Polygon Ltd has received a confirmed insider news that JJ Trading is getting into financial difficulty, comment on Polygon Ltd's possible decision on the debtors settlement term, creditors settlement term, stocking (inventory) strategies to minimize the impact on itself. Given the average debtors settlement period, average creditors settlement period and average inventory turnover period for the previous year are 60 days, 80 days and 50 days respectively. (6 marks)