Question 2 - Problem Solving (10 marks) Harold and Gracie are the directors of (FinanceYou Ltd), a company that specializes in helping small businesses get set up and off their feet. The company was set up five years ago and has had some good success over the years. However in the last year the company has struggled. One of their more successful sales representatives left to work for a competing company and as a result the new influx of clients has been slow. The directors are quite worried about this as they have quite a few monthly payments coming up. One is for the rent of the office, another is for their newspaper advertisements and a third is for employee wages. The directors are confident that they can pay each of these payments, but are very worried about any further payments that may arise and need immediate payment. Harold suggests to Gracie that they hire a marketing team to shoot a television commercial for them and in this way they can perhaps get more clients through ads. Gracie thinks it is a good idea and they hire BeSeen Ltd to do the commercial. The ad goes up and a bill from BeSeen comes in. A day later FinanceYou Ltd receives a fine for excessive noise and disruption due to the shooting of a very loud television commercial. FinanceYou Ltd are not able to pay for the television commercial or the associated fine.

A week later, Geraldine, an auditor, comes to do an audit on FinanceYou Ltd. Do you think she will find that the company is insolvent and if so, at what stage do this occur? What possible steps forward can be taken and which is the most suitable?