Statement of Financial Position of Leon Tools Corporation as at 31 December 2016/2015
	2016 (000)	2015 (000)
ASSETS
Non-current assets
Land	1 000	1 000
Plant and equipment	31 000	26000
Accumulated Depreciation	(13000)	(10000)
Current assets
Cash and cash equivalents	1 800	2 000
Trade receivables	7 600	6 000
Inventories	5 220	5 000
TOTAL ASSETS	33 620	30 000
Equities
ordinary share	4 000	4 000
Retained earnings	6 620	4 000
Non-current liabilities
Debentures	4 000	4 000
Current liabilities
Trade payables	15 600	15 000
Accrued expenses	3 400	3 000
TOTAL LIABILITIES & EQUITIES	33620	30000

Extract of the Statement of Comprehensive Income of Lion Tools Corporation for the year ended 31 December 2016/2015
	2016 (000)	2015(000)
Revenue	45 000	40 909
Cost of Goods Sold	(23 000)	(20 909)
Gross profit /EBITDA	22 000	20 000
Selling and admin expenses	(13 000)	(11 818)
Depreciation expenses	(3 000)	(2 000)
Earnings Before Interest & Tax /EBIT	6000	6182
Interest	(412)	(400)
Earning Before Tax /EBT	5 588	5 782
Tax	(2 235)	(2 313)
Earning After Tax /EAT	3 353	3 469
**ordinary dividend	733 000	758 000

You have obtained the following industry averages:

Gross profit margin	50%
Operating profit margin	15%
Net profit margin	8%
Return on assets /ROA	10%
Return on equity /ROE	20%
Current ratio	1.5 X
Quick ratio	1.0
Debt Ratio	0.5
Time interest earned /TIE	25
Average Collection Period /ACP	45
Inventory Turnover /ITO	8
Asset Turnover/ TATO	1.6

REQUIRED

Prepare a MEMORANDUM to submit to your boss, as to whether finance should be granted to Lion Tools Corporation.

Use the format (tables in industry averages) in order to complete the ratio analysis portion of the memorandum.

Marks will be awarded for a correct ratio including its relevant unit of measurement.

Provide comments and evaluations under the respective topics provided.

NO MARKS will be awarded for stating an increase or decrease in the ratios.

You may assume 365 days in a given year and you are not required to use averages.

Assume credit purchases are equal to cost of sales.

Show all your workings and round to 2 decimal points.

• Use font Arial 11 (double spacing) in preparing your memorandum
• Do not exceed 10 pages. (including appendix)
• Each group consists of max 8 persons.

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