Task 1: Results for three years for Poliziani Enterprises are presented below. Results are stated in percentages with 20-7 being the base year. Poliziani Enterprises Percentage Changes Base Year 20-1 20-9 20-8 20-7 136% 123% 100% Net Sales Cost of Goods Sold Gross Profit 169% 143% 100% 110% 106% 100% Expenses 134% 119% 100% Net Income 56% 71% 100% Comment on the trend for each of the following items (5 marks) Item Trends You Observe Net Sales Cost of Goods Sold Gross Profit Expenses Net Income What conclusions would you make about the company? (2 marks) Task 2: You are a loan manager and have received an application for a loan from J. Truman Ltd. From the financial statements provided by J. Truman, the following data have been calculated. Year 1 Year 2 Year 3 Year 4 Current Ratio 3:1 3:1 2:1 1.5:1 Quick Ratio 0.9:1 1:1 0.8:1 1:1 40% 45% 50% 45% Debt Ratio Equity Ratio 60% 55% 50% 55% Explain the trend from year 1 to year 4 for each ratio (4 marks). Ratio Explanation Current Ratio Quick Ratio Debt Ratio Equity Ratio Considering the data provided, would you grant the loan? Give at least two reasons for your answer (3 marks). Task 3: Indicate whether the following statements are true or false by highlighting T for true or F for false (8 marks). 1. Liquidity ratios indicate if a company can pay its long-term liabilities. T/F 2. The quick ratio is the relationship between the current assets that are easily converted into cash and the current liabilities. TIF 3. The working capital is the amount of the owner's equity.TIF 4. A current ratio of 3:1 is not generally acceptable. T/F 5. A trend analysis is used to forecast future results. T/F 6. The equity ratio is the ratio of equity to total assets. T/F 7. The current ratio is the ratio of current assets to current liabilities. T/F 8. A quick ratio of 1:1 is deemed to be acceptable. T/F