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Balance Sheet as at 31 Dec 2017 2017 $ 2016 $ $ $ Fixed assets Plant & Machinery 4,000 3,960 Current assets Stocks Debtors Bank 1,800 960 40 2,800 1,392 800 238 2,430 Current Labilities Trade Creditors Proposed dividend Taxation Accruals 520 320 160 100 1,100 200 400 170 120 890 Net current assets 1,700 1,540 5,500 2,000 3,500 5,700 2,000 3,700 10% debentures Financed by: Ordinary shares of $1 Retained profit 900 2,800 3.700 900 2,600 3,500 Required: (a) You need to assess the viability of this proposition by calculating the following financial ratios i. ii. iii. iv. V. vi. vii. viii. Gross profit margin Operating margin The return on capital employed Current ratio Quick asset ratio Debtors days Creditors days Stock turnover [8 x 3 = 24 Marks] (b) Using the financial ratios obtained above and your analytical skills, indicate with reasons whether your organisation could grant the request made by the managing director and any other information which might help you to make more informed credit decision. [6 Marks] Balance Sheet as at 31 Dec 2017 2017 $ 2016 $ $ $ Fixed assets Plant & Machinery 4,000 3,960 Current assets Stocks Debtors Bank 1,800 960 40 2,800 1,392 800 238 2,430 Current Labilities Trade Creditors Proposed dividend Taxation Accruals 520 320 160 100 1,100 200 400 170 120 890 Net current assets 1,700 1,540 5,500 2,000 3,500 5,700 2,000 3,700 10% debentures Financed by: Ordinary shares of $1 Retained profit 900 2,800 3.700 900 2,600 3,500 Required: (a) You need to assess the viability of this proposition by calculating the following financial ratios i. ii. iii. iv. V. vi. vii. viii. Gross profit margin Operating margin The return on capital employed Current ratio Quick asset ratio Debtors days Creditors days Stock turnover [8 x 3 = 24 Marks] (b) Using the financial ratios obtained above and your analytical skills, indicate with reasons whether your organisation could grant the request made by the managing director and any other information which might help you to make more informed credit decision. [6 Marks]