Question Two You are an independent financial advisor and have been given the following details relating to Rapido: Summary statements of financial position 31 December 2020 2021 2021 Actual Budget Actual K'000 K'000 K'000 Assets Non-current assets Tangible assets 957 1,530 1,620 Current assets Inventory 205 290 325 Trade receivables 305 720 810 175 0 0 Cash and bank balances Total assets 1,642 2,540 2,755 Equity and liabilities Capital and reserves Equity shares 800 800 800 200 200 200 Share premium account Retained earnings 280 420 460 1,280 1,420 1,460 Non-current liabilities 360 505 255 760 2,540 ***** Secured loans 0 Current liabilities 175 Trade and other payables Bank overdraft 187 362 Total liabilities and equity 1.642 Statements of profit or loss for the year ended 31* December 2020 2021 2021 Budget Actual Actual K'000 K'000 K'000 2,560 4,500 5,110 Revenue Cost of sales (1,700) (3150) (3,580) Gross profit 860 1,350 1,530 Administration and distribution (655) (880) (1,084) Operating profit 205 470 446 Interest payable (20) (35) 205 450 411 Taxation (86) (202) (182) 119 248 229 Extract from the statement of changes in equity: Dividends 82 108 49 The opening inventory figure for 2020 was K135,000 actual and K210,000 for 2021 budget. Required: Using the above information and appropriate ratios, prepare a report for the board of directors of Rapido assessing the profitability, liquidity, and solvency of the company and suggesting the necessary action to be taken. [7 marks] 3 marks will be awarded for a professional presentation 360 545 390 935 2.755