You have recently been employed as a young Finance Director of Cloud 9 Ltd which is in the production of farm equipment and as part of the companys annual exercise to review the growth of the company, you are expected to write a recommendation letter to advise Managing Director and entire management on the future of the business operations. The financials below are to assist you in the best possible way with critical analytical tools to make an informed suggestion to the team.

CLOUD 9 LTD

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31

	2020	2019	2018
Turnover	373,578	424,486	456,300
Cost of sales	(253,604)	(254,210)	(198,900)
Gross profit	119,974	170,276	257,400
Impairment of financial assets	(2,477)	(1,800)	(5,400)
Distribution costs	(87,036)	(91,309)	(96,100)
Administrative expenses	(32,556)	(50,656)	(67,200)
Other operating income	2,369	10,039	3,500
Operating profit	274	36,550	92,200
Finance income	2,594	4,949	7,200
Finance costs	(2,069)	(2,765)	(3,400)
Profit before income tax	799	38,734	96,000
Income tax expense	(285)	(13,718)	(15,450)
Profit for the year	514	25,016	80,550
Other comprehensive income	-	-	-
Total comprehensive income	514	25,016	80,550
Table 1 Source (Author, 2022)

CLOUD 9 LTD

STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31

Non-current assets	2020	2019	2018
Property, plant and equipment	178,315	187,380	197,000
Right-of-use assets	2,793	3,726	4,500
Intangible assets	1,426	867	1,200
Current assets	182,534	191,973	202,700
Inventories	94,372	96,606	99,500
Trade and other receivables	100,612	47,024	75,000
Current income tax assets	4,713	1,184	3,200
Cash and cash equivalents	54,021	39,032	46,950
	253,718	183,846	224,650
TOTAL ASSETS	436,252	375,819	427,350

EQUITY AND LIABILITY Stated capital	10,000	10,000	10,000
Retained earnings	250,105	249,591	270,200
Liabilities	260,105	259,591	280,200
Non-current liabilities: Deferred tax liabilities	9,349	11,295	10,050
Employee benefit obligations	284	1,222	3,400
Lease liabilities	1,833	3,717	5,000
Current liabilities:	11,466	16,234	18,450
Lease liabilities	713	425	1,050
Employee benefit obligations	39	168	500
Trade and other payables	160,923	96,363	105,000
Dividend payable	3,006	3,038	3,700
	164,681	99,994	110,250
Total liabilities	176,147	116,228	128,700
TOTAL EQUITY AND LIABILITIES Table 2 Source (Author, 2022)	436,252	375,819	427,350
Required:

a. Highlight and analyze the statement of comprehensive income of Cloud 9 Ltd using the horizontal technique to advise management on their new future business operation.

b. Using ratio analysis, assess the companies performance and advice management accordingly.