QUESTION 1 FAA Furniture, a manufacturer and wholesaler of high quality home furnishings has been experiencing low profitability in recent years. As result, the board of directors has replaced the president of the firm with a new president, Jalal Idris, who has asked you to make an analysis of the firm's financial performance. The most recent industry average ratios and FAA Furniture's financial statements are as follows: Statement of Financial Position As At 31 December 2019 (RM'000) Cash 1,400 Account payable 3,000 300 Notes payable 3,400 10,000 Accrued wages and salaries 3,100 Marketable securities Account receivables Inventories. Prepaid expenses Total current asset 12,000 Current portion of short term debt 500 300 Total current liabilities 10.000 24000 Deferred income taxes 1,500 6,300 Plant and equipment Accumulated depreciation Total fixed asset 14,300 Mortgage 7.300 Term loans 2,900 7,000 Total long term liabilities 10.700 Share capital 2,100 Retained earnings 8,200 Total equity 10.300 Total asset 31,000 Total liabilities and equity 31,000 Statement of Profit or Loss For The Year Ended 2019 (RM2000) Net sales 51,00 Cost of goods sold 38,00 Gross profit 13,000 Operating expenses 9,000 4,000 Net operating income Interest expense Earnings before taxes- 1,000 3,000 1.200 Income taxes Earnings after taxes. 1,800 Page 2 of 6. IFFN 3223/FIN3013/BAF 3723 CORPORATE FINANCE/FE2022-1 Current ratio 2 times Acid test ratio 1.1 times 54.9% Debt ratio Time interest earned 2.4 times Inventory turnover 3.6 times Average collection period 63 days Net profit margin 4.14% Return on equity 9.3% Required: a) Compute the relevant ratios from financial statements provided above: i) Average collection periodi ii) Return on equity iii) Net profit margin iv) Current ratio v) Debt ratio- (10 marks) b) Based on your answer in (a) above, analyse the firm's financial performance as compared to the industry average ratios. (10 marks) Industry Average Ratios