Question (2.A). (5 marks)

A lending officer is provided with the following Table 1 about the financial ratio of a business borrower XYZ Ltd. XYZ Ltd. is a paper producer and has a policy of giving 30 days credit. What do these tell us about the efficiency management of XYZ Ltd?

Table 1. Financial Ratios of XYZ Ltd.
	2018	2019	2020
Current Ratio	1.5	1.4	1.2
Quick Ratio	0.9	0.8	0.8
Inventory Turnover Ratio	2	2.2	1.78
Creditor Turnover(days)	37	39	64
Debtor Turnover(days)	73	74	86
Gross profit	27%	24%	22%
Net Profit	7%	6%	6%
Gearing ratio	8%	7%	7%