Gainsborough Fashions Ltd operates a small chain of fashion shops. In recent months the business has been under pressure from its suppliers to reduce the average credit period taken from three months to one month. As a result, the directors have approached the bank to ask for an increase in the existing overdraft for one year to be able to comply with the suppliers’ demands. The most recent financial statements of the business are as follows:

Transcribed Image Text:

Statement of financial position as at 31 May ASSETS Non-current assets Property, plant and equipment Fixtures and fittings at cost Accumulated depreciation Motor vehicles at cost Accumulated depreciation Current assets Inventories at cost Trade receivables Total assets EQUITY AND LIABILITIES Equity 1 ordinary shares General reserve Retained earnings Non-current liabilities 90,000 (23,000) 34,000 (27,000) 3 67,000 7,000 74,000 198,000 3,000 201,000 275,000 20,000 4,000 17,000 41,000