QUESTION THREE $[25]$

Hakot Projects Ltd has approached you to analyse and interpret their financial statements.

The following amounts were extracted from the records of the company:

$202120222023$

R R R

Project Invoicing $200000220000250000$

Cost of projects $140000150000165000$

Profit before interest and tax $120001100010500$

Accounts receivable $165002500029600$

Accounts payable $130001470017000$

Inventory $187502600030400$

Bank $/($Overdraft$)4000(1000)(2000)$

Required:

$3\mathrm{.}1$ Discuss the purpose of financial statement analysis. $(3)$

$3\mathrm{.}2$ Calculate the following ratios for each of the three years:

$3\mathrm{.}2\mathrm{.}1$ Accounts receivable collection period

$3\mathrm{.}2\mathrm{.}2$ Inventory holding period

$3\mathrm{.}2\mathrm{.}3$ Accounts payable payment period

$3\mathrm{.}2\mathrm{.}4$ Current ratio

$3\mathrm{.}2\mathrm{.}5$ Acid test ratio $(15)$

$1$

$3\mathrm{.}3$ Analyse the company$$s working capital management in light of the analysis undertaken in $3\mathrm{.}2$ above. $(7)$