QUESTION TWO

$[25]$

As a Project Finance Analyst, you are required to assess Conrad Limited's $2024$ and $2023$ financial performance to determine whether the company is financially prepared to undertake a large$-$scale capital project in $2025.$ Your analysis should focus on working capital management, liquidity, and profitability to evaluate the company's investment readiness.

Extract of Statement of Comprehensive Income for the year ended $31$ December

$\backslash$table$[[,2024($R$),2023($R$)],[$Sales $($all credit$),1000000,800000],[$Cost of Sales $($all credit$),470000,400000],[$Profit After Tax,$182000,157000]]$

Extract of Statement of Financial Position as at $31$ December

$\backslash$table$[[,2024($R$),2023($R$)],[$Inventories$,300000,400000],[$Accounts Receivable,$200000,200000],[$Shareholders$\text{'}$ Equity,$1000000,750000],[$Accounts Payable,$90000,70000],[$Bank Overdraft,$60000,80000]]$

NB: The credit terms to debtors are $30$ days and the payment terms to creditors are $90$ days.

Required: Answer the questions below, and where applicable, express ratios to two decimal places, show formulas, and provide brief interpretations.

$2\mathrm{.}1$ Is Conrad Limited taking full advantage of its supplier credit terms? Motivate your answer using the creditors payment period based on a $90-$day credit term. $(5$ marks$)$

$2\mathrm{.}2$ Assess whether the company could meet its short$-$term obligations under tight project cash flow constraints. Use an appropriate liquidity ratio and explain your reasoning. $(5$ marks$)$

$2\mathrm{.}3$ Has there been an improvement in the company's gross profitability from $2023$ to $2024?$ Support your answer using the gross profit margin. $(5$ marks$)$

$2\mathrm{.}4$ Assess whether shareholders are earning a sufficient return on their investment by calculating the Return on Equity $($ROE$)$ for $2024.(5$ marks$)$

$2\mathrm{.}5$ Use an appropriate ratio to assess the efficiency of Conrad Limited's credit management in relation to sales. $(5$ marks$)$

$2$