The following balances have been extracted from the accounts of Deloitte Ltd. at 31 December 2016: RM"000 Sales 3,878 Gross profit 1.978 Operating expenses 1.290 Interest expense 30 Tax expense 81 Inventory 500 Cash 204 Debtors 760 Bank loan 600 Paid-up capital issued at RM1) 1.000 Retained profits 1.108 Creditors 616 Other important information are as follows: . All sales are made on credit The closing debtors decreased by 50% (reduced to half) from the opening balance for the year. The opening balance of inventory was RM100,000 a. Based on the information given above, calculate the financial ratio for 2016 as listed below. Show workings. (8 marks) 1. Net profit margin Net profit margin Net profit before interest and taxation x 100 Sales li. Average settlement period for debtors Average settlement period X 365 Average trade debtors Credit sales ili. Average inventory turnover period Average inventory tumover periods = x 365 Average inventory held Cost of sales iv. Quick ratio (Acid test) Acid test ratio = Current assets (excluding inventory and prepayments) Current liabilities b. Use the appropriate performance data calculated above to analyze the healthiness of the company. 1. Interpret the profitability of the company based on the net profit margin. Given value for previous financial period was 34.7%. Discuss two (2) possible future undertakings the company can do to improve the net profit margin. (3 marks) ii. Interpret the liquidity of the company. (2 marks) ill. Deloitte Ltd is supplying a substantial amount of goods on usual credit terms to JJ Trading, its main purchaser. If Deloitte Ltd has received a confirmed insider news that JJ Trading is getting into financial difficulty, comment on Deloitte Ltd's possible decision on the following area to minimize the impact on itself. Given value of average debtors settlement period and average inventory turnover period for the previous financial period were 60 days and 70 days respectively. Out: Online Final Test 1. Debtors settlement terms. (2 marks) 2. Stocking (inventory) strategies. (2 marks)