QUESTION 1 40 MARKS PCA Lid declared bankruptcy in June 2020 soon after publishing the financial statements for the year ended December 2019. PCA Led's financial information for 2016 through 2018 are presented below. PCA Lid's Income statement for the year ended 31 Decembe 2017 (R' Millions) 2018 (R' Millions 2 114 Revenue 1950 -1413 Cost of sales -1413 Gross profit 537 701 -452 -471 85 230 Operating expenses Operating profit Interest Expense Profit before tax Income tax -63 -81 22 -8 -51 Net profit 98 PCA Balance Sheet as at 31 December 2016 2017 2018 Assets Current assets 12 10 82 Cash and cash equivalent Accounts receivable 297 199 315 Inventories 431 472 735 45 27 66 Prepaid expense and other Total current assets 785 708 1198 Non-current assets PPE Other assets 130 224 326 736 851 1239 Total non-current assets 866 1075 1565 Total assets 1651 1783 2763 Liabilities and Equity Liabilities Current liabilities 30 Overdraft Accounts Payables Accrued liabilities 21 289 145 600 504 122 128 111 17 24 432 679 880 Taxes payable Total current liabilities Non-current liabilities Loans 354 412 1188 14 12 29 Other long term liabilities Total non-current liabilities 368 424 1217 Total Liabilities 800 1 103 2097 750 578 563 Equity Share capital Redeemable preferable shares Total equity 101 102 103 851 680 666 Total liabilities & Equity 1651 1783 2763 REQUIRED Marks Discuss whether information in the above financial statements provides any warnings about the company's eventual demise. Your answer should be based on an analysis of PCA's 2017 - 2018 activity, solvency, liquidity and profitability ratios. 24 (b (b) Briefly describe any anomalies or peculiarities in PCA's ratios or financial data 10 6 c) Breakdown PCA'S ROE for 2017 - 2018 and comment in light of the current situation faced by this company TOTAL 40