The Bujang Lapok Berhad manufactures and sells a line of exclusive sportswear. The company was started by Miss Sizuka just 10 years ago and has been profitable every year since its inception. The chief financial officer for the firm, Mr. Nobitha, has decided to seek a line of credit form the firm's bank. In the past, the company has relied on its suppliers to finance a large part of its needs for inventory. However, in recent months tight money conditions have led the firm's suppliers to offer sizable cash discounts to speed up payments for purchases. Mr. Nobitha wants to use the line of credit to supplant a large portion of the firm's payable during the summer, which is the firm's peak seasonal sales period. The firm's two most recent statement of financial position were presented to the bank in support of its loan request. In addition, the firm's income statement for the year just ended was provided. These statements are found in the following: Income Statement for the year ending December 31, (in RM millions) This year 53,195 41,304 11,891 Sales revenue Less: Cost of goods sold Gross profits Less: Operating expenses Selling & administration Pension Non-pension post retirement Depreciation Amortization of tools Total operating expenses Operating profits Less: Interest expenses Net profit before taxes Less: Taxes (40%) Net profit after taxes Current Assets Cash and cash equivalents Marketable securities Account receivables Inventories Prepaid taxes Other receivables Total Current Assets Statement of Financial Position for the year ending December 31 (in RM millions) This year Property & equipment Less: Accumulated Depreciation Net Plant & Equipment Other Assets Special tools Intangible assets Deferred tax assets Total Other Assets Total Assets Current Liabilities Account payables Short-term debt Accrued liabilities Other payments ments Total Current Liabilities Non-Current Liabilities Long-term debt Accrued employee benefits Other non-current liabilities Total Non-Current Liabilities Total Liabilities iv. Shareholder's Equity Preferred stock Common stock (at RM1 par) Additional paid-in capital Retained earnings Total Shareholder's Equity Total Liabilities and Shareholder's Equity 4,064 405 758 1,100 1,120 7,447 4,444 995 3,449 1,380 2,069 Last year 52,235 38,032 14,203 3,933 714 834 994 961 7,436 6,767 937 5,830 2,332 3,498 5,543 2,582 2,003 4,448 985 13,623 29,184 20,468 7,873 12,595 3,566 2,082 490 6,138 47,917 8,290 2,674 7,032 1,661 19,657 9,858 3,378 4,065 17,301 36,958 Industry Average Ratio this year 0 408 5,506 5,045 10,959 47,917 Current Ratio Acid Test Ratio Inventory Turnover Average Collection Period Non-Current Asset Turnover Total Asset Turnover Debt Times Interest Earned Net Profit Margin 4.70% Return on Assets 4.60% Return on Common Equity 20.70% 1.78 1.55 7.41 22.8 1.54 0.89 75% 6.4 Last year 5,145 3,226 1,695 3,356 1,330 12,433 27,185 18,281 7,208 11,073 3,643 2,162 395 6,200 44,458 7,826 4,645 5,582 811 18,864 7,650 3,514 3,736 14,900 33,764 2 364 5,536 4,792 10.694 44,458 You were assigned the task of analysing Mr Nobitha's loan request. Based on the given information, answer the following questions. a. Compute the financial ratios for both years, and using the average industry evaluate the firm in the following category: Debt Management Profitability