Unicorn Ltd is a South African toy manufacturer. The company has been facing financial difficulties over the past $3$ years due to changes in customer preferences. Research found that many parents are spending less on toys as there have been considerable increases in the price of essential items such as food and school fees.

The statement of Financial Position as at $31$ October $2023$ is as follows.

R

Non$-$current assets

Land and buildings

$241558$

Equipment

$75943$

Investment

$1$

$33750$

Current assets

Inventory

$150309$

Receivables

$2$

$88365$

Total assets

$589925$

Equity and Liabilities

Ordinary shares

$250000$

$5\%$ cumulative preference shares

$87500$

Retained income

$(49776)$

Non$-$current liabilities

$8\%$ debentures $2027$

$100000$

Current liabilities

Trade payables

$140310$

Interest payable

$3$

$16000$

Overdraft

$45891$

Total equity and liabilities

$589925$

Notes:

$1.$ The investment is to be sold at the current market price of R$75000.$

$2.15\%$ of the receivables have been assessed as being non recoverable.

$3.$ Interest expense has not been paid over the past $2$ financial periods due to cash constraints.

Required:

a$.$ Show the likely position of the key stakeholders $($ordinary shareholders, preference shareholders and debenture holders$)$ if the firm goes into liquidation, assuming that the assets of the company have been valued as follows:

Land

R$95000$

Building

R$98000$

Equipment

R$37500$

Inventory

R$57000$

$(7)$

b$.$ Assume that you are the Financial Manager of Unicorn Ltd$.$ The Financial Director has tasked you with analysing whether the company needs a business reconstruction plan. Outline the key areas which you would include in your report in order to assess whether the company is failing $(6)$such as food and school fees.

The statement of Financial Position as at $31$ October $2023$ is as follows.

Notes:

The investment is to be sold at the current market price of R$75000.$

$15\%$ of the receivables have been assessed as being non recoverable.

Interest expense has not been paid over the past $2$ financial periods due to cash constraints.

Required:

$(7)$

failing

$(6)$