Provide a well-motivated response, regarding a prospective new customer,

An application was received from a new customer from Eswatini called Ilihhiya Bespoke Clothing. They will be placing orders off our catalogue. They requested a facility of R3 million, with 60 day payment terms. Is it a good idea to grant credit to Ilihhiya Bespoke Clothing?

Discuss what the right decision would be, as to whether or not to grant them their request ( grant credit). Attached below is the credit application for as completed by the customer and an extract of their annual financial statements for reference.

ILIHHIYA Summarised Statement of Profit and Loss and Other Comprehensive Income for the financial year ended 31 October 2021 2020 L'000 L'000 Revenue 5 118 2 784 Cost of sales -2 559 -1 392 Gross profit 2 559 1 392 Operating epenses -1 279 853 Operating profit 1 279 539 Finance costs -195 -44,28 Profit before taxation 1 084 495 Current taxation -271 -94 Profit for the year 813 401 Summarised statement of Financial Position as at 31 October 2021 2020 L'000 L'000 Non-current assets 3 658 1 363 Property, plant and equipment 3 658 1 363 Current assets 2 805 2 709 Inventories 2 474 2 356 Trade and other receivables 77 28 Cash and cash equivalents 255 325 TOTAL ASSETS 6 463 4 072 Total Equity 1 227 567 Issued capital 500 500 Retained income 727 67 Non-current liabilities 2 608 1 369 Lease liability 069 1 018 Long-term interest bearning debt 1539 351 Current liabilities 2 628 2 136 Current portion of lease liability 206 18/ Current portion of long term interest bearning debt 86 18 Trade and other payables 2 336 1 931 TOTAL EQUITY AND LIABILITIES 3 463 4 072Credit Application: Courageous Clothing (Pty) Ltd Name/Address Last: Maghlangu First: Zen Middle Initial: ZS Title MR Name of Business: Ilihhiya Bespoke Clothing Ltd Tax I.D. Number Address: 33 Esser Street, Manzini Lifestyle Centre, City: Manzini, Eswatini State: ZIP: Phone: +2682 505 7498 Company Information Type of Business: Clothing retail store In Business Since: | November 2019 Legal Form Under Which Business Operates: Corporation X Partnership Proprietorship If Division/Subsidiary, Name of Parent Company: N/A In Business Since: Name of Company Principal Responsible for Business Transactions: Title: MRS Zena Mahlangu Address: City State: ZIP: Phone: Name of Company Principal Responsible for Business Transactions: Title: Address: City State: ZIP Phone: Trade References Company Name: Company Name: Company Name: Contact Name Contact Name Contact Name Address Address: Address: Phone Phone: Phone: Account Opened Since: Account Opened Since: Account Opened Since: IT LIMIT Credit Limit: Credit Limit Current Balance: Current Balance: Current Balance: I hereby certify that the information contained herein is complete and accurate. This information has been furnished with the understanding that it is to be used to determine the amount and conditions of the credit to be extended. Furthermore, I hereby authorize the financial institutions listed in this credit application to release necessary information to the company for which credit is being applied for in order to verify the information contained herein. L Maklangu 15 Feb '22 Signature Date