Section B Liquidity/Stability/Management Effectiveness 4 Marks Sleek Furniture has a target of customers paying their accounts within a month. Sam is concerned that with the expansion in products and therefore sales, that Sleek Furniture may struggle to meet this target. Sleek Furniture Summary of Assets and Liabilities as at 31 March 2012 and 2013 2012 2013 Assets Prepayments 1,200 900 Accounts Receivable 20,000 42,000 Inventory 53,000 78,000 Property, Plant and Equipment 27,000 84,100 Total Assets 101,200 205,000 Liabilities Bank Overdraft 2,000 12,000 Accounts Payable 4,000 3,200 GST Payable 5,200 9,800 Loan (due 30 June 2015) 50,000 Total Liabilities 11,200 75,000 Equity Capital 31 March 90,000 130,000 Required: a) Complete the following table. You will also need to refer to the Income Statement on P35. 2013 Accounts Receivable Turnover Current Ratio Equity Ratio 2012 30 days 6.63:1 0.91:1 0.63:1 (1 Mark) b) Explain why Sam should be concerned about the trend in the accounts receivable turnover for Sleek Furniture. Suggest one recommendation to help improve the situation. (1 Mark) c) Explain whether Sleek Furniture will be able to borrow in the future. (1 Mark) d) Suggest a reason why the current ratio for 2013 may be unacceptable. (1 Mark) Section B Liquidity/Stability/Management Effectiveness 4 Marks Sleek Furniture has a target of customers paying their accounts within a month. Sam is concerned that with the expansion in products and therefore sales, that Sleek Furniture may struggle to meet this target. Sleek Furniture Summary of Assets and Liabilities as at 31 March 2012 and 2013 2012 2013 Assets Prepayments 1,200 900 Accounts Receivable 20,000 42,000 Inventory 53,000 78,000 Property, Plant and Equipment 27,000 84,100 Total Assets 101,200 205,000 Liabilities Bank Overdraft 2,000 12,000 Accounts Payable 4,000 3,200 GST Payable 5,200 9,800 Loan (due 30 June 2015) 50,000 Total Liabilities 11,200 75,000 Equity Capital 31 March 90,000 130,000 Required: a) Complete the following table. You will also need to refer to the Income Statement on P35. 2013 Accounts Receivable Turnover Current Ratio Equity Ratio 2012 30 days 6.63:1 0.91:1 0.63:1 (1 Mark) b) Explain why Sam should be concerned about the trend in the accounts receivable turnover for Sleek Furniture. Suggest one recommendation to help improve the situation. (1 Mark) c) Explain whether Sleek Furniture will be able to borrow in the future. (1 Mark) d) Suggest a reason why the current ratio for 2013 may be unacceptable. (1 Mark)