QUESTION 1: ANALYSIS AND INTERPRETATION TOTAL: 24 MARKS Part A: BigWorld is a large home appliance distributor in New Zealand and has been in operation for 20 years. Despite the COVID-19 lockdowns in 2020, their click and collect delivery has flourished. This was attributable to their strong e- commerce platform and their trusted after sales warranty. Pricing of their products are in the mid-range, and this enables BigWorld to capture about 70 percent of the market share. The following are the financial ratios of BigWorld Limited for the last two financial years. You have been asked to assess the overall financial performance of this company in terms of its profitability, efficiency, liquidity and solvency. You are also asked to recommend actions to be undertaken to address any adverse situations. Yolanda Limited Ratios Formulae 2020 2021 a. Gross profit % b. Net profit % = Gross profit/Sales =NPAT/Sales 50% 46% 14% 996 c. Inventory Turnover period = (Closing inventory *365)/Cost of goods sold 20 days 25 days d. Average = (Closing Account 40 days 30 days settlement period for Accounts receivable Receivables *365)/Credit sales e. Current ratio = Current assets/Current Liabilities 12:1 1.5:1 f. Quick asset ratio = Liquid assets/Current liabilities 0.97:1 1:1 g. Gearing =Total liabilities/Total Equity 5596 72% h. Interest cover = Operating profit/Interest 12 times 9.5 times Required: a. Evaluate and discuss the overall performance of BigWorld from 2020 to 2021 in terms of its profitability, liquidity, efficiency in working capital management, and solvency. Your answer must include at least one potential causal factor for the observed trends for each ratio.