Question 3. (16 marks) In reviewing the financial statements for the year ended February 2018, you identified the following mistake. 1 The provision for doubtful debt is understated a Required: a) Identify one ratio each per the profitability, liquidity, solvency, and asset utilization groups of ratios, which will be affected by the above-mentioned mistake Indicate if it is overstated or understated and support your answer with a reason (12) b) Identity and explain two reasons why management will purposely understate the provision for doubtful debt Important: Please organise your answer for point 1 according to the following example: Example: No Mistake Ratio affected Reason The provision for warranties is understated: Profitability Gross profit ratio Cost of Sales is understated and as a result gross profit is overstated The gross profit ratio is also overstated Liquidity Current Ratio Current liabilities are understated which in turn will mean the current ratio is overstated Asset utilisation ratios No affect N/A Solvency Debt ratio Total liabilities are understated, which in turn means the debt ratio is understated . LED