QUESTION 3 Presto Berhad has been particularly concerned with its liquidity position in recent months. The most recent income statement and balance sheet of the business are as follows: Income Statement for the year ended 30 September 2022 Sales revenue RM000 RM000 452 Less Cost of Sales Opening inventories Add Purchases Less Closing Inventories Gross Profit Expenses Net loss for the period 125 341 466 (143) (323) 129 (132) (3) Balance Sheet as at 30 September 2022 Non-current assets Freehold premises 280 Fixtures and Fittings (Carrying 25 Amount) Motor Vehicles (Carrying Amount 52 357 Current Assets Inventories Receivables Less Current Liabilities Trade payables 143 163 306 145 Bank overdraft 140 (285) 21 Working Capital 378 Less Non-Current Liabilities Loans (120) 258 Equity Ordinary Share Capital Retained Profit 100 158 258 The receivables and payables were maintained at a constant level throughout the year. Required: A. What is the liquidity position of the company? Support your answer with relevant ratios. (10 marks) B. What is the Cash Conversion Cycle for the company? Assume a 360-day year. C. Define operating gearing. (10 marks) (2 marks) D. (i) Explain what is meant when a business activity has high operating gearing. (ii) What are the implications for a business with high operating gearing? (8 Marks)