The following information relates to the African Parade Spirits (APS) limited for financial year end 2020. STATEMENT OF FINANCIAL POSITION 2020 2019

R000 R000

ASSETS

Non-current assets

Property, plant and equipment 105 846 70 560

Investments 5 000 5 000

Current assets

Cash and Bank - 27 500

Inventory 58 902 15 345

Trade receivables 101 664 32 456

Total assets 271 412 150 861

EQUITY AND LIABILITIES

Capital and reserves

Ordinary share capital 25 000 25 000

Share premium 26 400 26 400

13% Convertible preference shares 15 000 15 000

Distributable reserve 53 810 32 640

Non-current liabilities

Long-term loan (15%) 8 000 8 000

12% Redeemable preference shares 30 000 30 000

Deferred tax 290 190

Current liabilities

Bank overdraft (25%) 43 092 -

Trade payables 65 820 11 971

South African Revenue Service - 250

Shareholders for dividend 4 000 1 600

Total equity and liabilities 271 412 150 861

STATEMENT OF COMPREHENSIVE INCOME

2020 2019

Revenue (Gross sales) 428 634 190 021

Gross profit 201 825 110 234

Profit before finance charges and taxation 72 093 40 271

Finance charges 15 573 4 800

Profit before taxation 56 520 35 471

Taxation 16 391 10 271

Profit for the period 40 129 25 200

The following information has also been presented to you:

1. Inventory, trade receivables and trade payables are at levels that could be considered average for the year.

2. APS has been too lenient with regards to receivable collections during the last year and this has caused significant increases in the receivables balance.

3. All inventory is purchased from suppliers on credit.

4. The convertible preference shares are convertible into ordinary shares at the discretion of the directors.

5. The growth in property, plant and equipment is largely due to the expansion of the companys fleet of delivery vehicles as well as an investment in a new warehouse. These investments were paid for in cash.

6. Only 10% of revenue is cash sales, the remaining 90% of sales take place on a credit plan allowing interest free repayments of up to 60 days.

REQUIRED: Evaluate the performance of APS Ltd from 2019 to 2020, with reference to relevant financial ratios. Where you deem it appropriate, provide recommendations for improvements. Using Excel format.

Your evaluation should focus on

Liquidity issues (6)

Debt management (6)

Efficiency (11)

Presentation (2)

Hint: Recommendations for improvements must be concise and to the point in bullet format. Three bonus marks are available for insightful comments or suggestions