Several potential investors have been studying the affairs of Pelican Corporation to decide whether to invest in the company by purchasing unsecured notes which the company was proposing to issue. There was some speculation that the company was experiencing liquidity problems. The statements of financial position at 30 June 2019 and 2020 follow:

Required

(a) Calculate appropriate liquidity and financial stability ratios for the years ended 30 June 2019 and 2020. Research reveals that typical ratios in the industry for the current and quick ratios are 1.7:1 and 1.0:1 respectively. For financial stability ratios, industry averages are 2.5:1 for the capitalisation ratio and 60% for the debt ratio.

(b) Comment on the liquidity and financial stability of the company, given the information available.

(c) Would you, as one of the potential purchasers of the unsecured notes, lend money to the company? Explain why or why not.

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CURRENT ASSETS Cash at bank Marketable securities Accounts receivable (net) Inventories Other current assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Accounts payable Bills payable PELICAN CORPORATION Statements of Financial Position as at 30 June Current maturities of long-term debt Accrued expenses Provisions TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Long-term debt Accrued expenses (payroll) Other non-current liabilities TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES TOTAL EQUITY TOTAL LIABILITIES AND EQUITY 2020 2019 $ 3264 $ 2832 1519 1775 1178 930 2619 1848 3094 3605 11674 10 990 19 960 16276 $31 634 $27266 4 880 4300 1574 2555 978 450 720 728 3420 2345 11572 10378 5 800 4160 5425 4730 2390 2055 13615 10 945 25 187 21 323 6447 $31 634 5943 $27 266