You are required to:

i) Define what is meant by the term overtrading and describe its symptoms.

ii) By studying the above accounts and using ratio analysis, identify the main problems facing ToyToy Plc.

ToyToy Plc is a toy manufacturing company, which manufactures Polly Playtime, the latest doll craze amongst young girls. The company is now at full production of the doll. The final accounts for 2018 are as per table below. The 2017 accounts are also shown for comparison purposes. INCOME STATEMENT Y/E 31 DECEMBER 2018 2018 '000 2017 '000 30,000 20,000 10,000 450 Sales Cost of sales Operating profit Interest Propit before tax Tast Profit after tax Dividends Retained profit 9,550 2.000 7,550 2,500 5,050 20,000 11,000 9,000 400 8,600 1.200 7,400 2.500 4,900 BALANCE SHEET AS AT 31 DECEMBER 2018 2018 2017 '000 '000 '000 '000 1,500 1,400 Non-current assets Current assets Inventory Accounts receivable Cash 3,000 7,350 10,000 2,500 6,000 4,500 19,850 13,500 21,350 14,900 5,000 6,450 1,200 5,000 1,400 3,500 Ordinary shares (0.25) Profit 8% debentures Current liabilities Overdraft Dividends owing Trade accounts payable 2.000 2,500 4,200 8,700 21.350 2,500 5,000 14.900