1. Statement of Financial Position/Balance sheet for X Ltd as at 31^st December 2022 and 2021

2022 shs (000)2021 shs (000)Cash360350Debtors 13601480Inventories/Stock26602470Prepaid expenses11090Total current assets44904390fixed assets32003100Accrued depreciation17201630Long term investment540460Total assets65106320Bank overdrafts900740Creditors 300280Tax accruals72254Other accruals400330Total current liabilities16721604Long term debt12801260Ordinary share capital720720Retained profits28382736 65106320

Statement of Comprehensive Income/Income Statement for X Ltd for the periods of 2021 and 2022

20222021 Net Sales80007500 Cost of Sales52005000 Gross profit28002500 Selling expenses10001600 Interest costs170140 Earnings before tax1630680 Tax (50%)815340 Earnings after tax815340 Cash dividend200120 Retained Profits615220

Prepare a financial analysis for X Ltd, using ratios.

Assumed industry average ratios are:

Liquidity ratios: current ratio= 2.4:1 and Quick ratio= 1.5:1

Activity ratios: rate of inventory turnover= 5:1, Debtors turnover= 3:1, Creditors turnover= 2.5:1, Fixed asset turnover= 3.5:1

Profitability ratios: Net profit margin= 20%, Return on investment= 30%, Return on fixed assets= 25%

Solvency ratios: Debt to equity ratio =2:1, Debt to total assets= 0.5:1, Interest earned= 5 times

Required: Use the information to assess the financial position and operating financial performance of the firm.