QUESTION TWO (20 MARKS) a. Outline four merits and four demerits of quantitative analysis of financial statements (8 Marks) b. Mauzo ltd. presented the following financial statement Income statement for the year ended 30 June 2019 2020 Sh. Sh. Sales 3,000,000 4,800,000 Less: cost of goods sold 1,650,000 2,700,000 Gross profit 1,150,000 2,100,000 Less: trading expenses 675,000 825,000 Earning before int, and tax 675,000 1,275,000 Less: Debenture interest 37.500 37,500 Net profit before taxation 637,500 1,275,000 Less: Corporation tax 240,000 480,000 Net profit after taxation 397,500 757,500 Less: Ordinary share dividend 187,500 262,500 Undistributed profit for the year 210,000 495,000 Statement of Financial Position as at 30 June 2019 2020 Sh. Sh. Sh. Sh. Fixed assets at cost 1,500,000 2,100,000 Less: Depreciation 300,000 1,200,000 375,000 1.725,000 Current assets: Stock 600,000 825,000 Debtors 375,000 525,000 Cash 120,000 1,350,000 Less: current liabilities 1,095,000 Creditors 217,500 300.000 Taxation 240,000 480,000 Proposed dividend 187,500 262,500 Bank overdraft 97,500 (645,000) (1.140.000) 1,650,000 1.935,000 Financed by: Ordinary share capital 750,000 750,000 (75,000 @ sh 10) Undistributed profits 525,000 1,020,000 10% debentures 375,000 165,000 1,650,000 1.935,000 Additional Information The share price at the year-end was sh. 16 and sh. 20 for 2019 and 2020 respectively Required: Evaluate the financial health of the firm for the two years using two or more quantitative financial distress models (12 marks)