The managing director of Swiftway Ltd has approached your organisation requesting a substantial increase in their credit facilities in order to fund an expansion programme. You are presented with their latest financial statements.

a) Calculate the following ratios for Swiftway Ltd for each of the two years:

Gross profit percentage

Operating profit percentage

Return on Capital Employed

Current Ratio

Quick Ratio

Trade Receivables Collection Period (based on revenue)

Trade Payables Payment Period (based on cost of sales)

Inventory Holding Period (based on cost of sales)

b) Prepare a report for your manager using your calculations to indicate whether your organisation could grant the request made by the managing director of Swiftway Ltd and any other information, which might help you to make a more informed credit decision.

Swiftway Ltd Summary statement of financial position as at 31 December 2019 2018 000 000 ASSETS Non-current assets 4,000 3,960 Current assets Inventories 1,800 1,392 Trade receivables 960 800 Bank 40 238 Total assets 6,800 6,390 Equity Ordinary Shares of 1 Retained earnings Total equity 900 2,800 3,700 900 2,600 3,500 Non-Current Liabilities 10% Debenture 2,000 2,000 Current liabilities Dividend payable Accruals Trade payables Taxation 320 100 520 160 1,100 400 120 200 170 890 Total equity and liabilities 6,800 6,390 Swiftway Ltd Summary statement of profit or loss For the year ended 31 December 2019 000 Revenue 8,030 Cost of sales (4,818) Gross profit 3,212 Distribution Costs (1,606) Administration Expenses (600) Profit from operations 1,006 Finance Costs (200) Profit before Tax 806 Taxation (286) Profit for the period 520 Dividend (320) Retained Profit 200 2018 000 7,300 (4,234) 3,066 (1,320) (480) 1,266 (200) 1,066 (372) 694 (400) 294