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Question 1 (45-marks) PETDAG PLC's Statements of Comprehensive Income for the years ending 31st December Revenue Cost of Sales Gross Profit Operating expenses Operating profit Finance cost Profit before tax Tax expense Profit for the period PETDAG PLC's Statements of Financial Position as at Non-Current Assets Intangible assets Tangible assets Current Assets Inventories Trade receivables. Cash and cash equivalents Total assets Shareholders' equity Ordinary shares @ $1 Share premium Retained earnings. Non-Current Liabilities 10% loans Current Liabilities Trade payables Total-shareholders' equities and liabilities a a a A in a a a a a H a a a Ha A ws DE ER R D DE DR R B TATATATA KL R RA D B 2019 $000s 170,000 (62,050) 107,950 (88,262) 19,688 (7,700) 11,988 (2,388) 9,600 175,000 (59,170) 115,830 (84,150) 31,680 (8,300) 23,380 (4,740) 18,640 a 31.12.2019 $000s 31.12.2018 $000s 124,000 130,000 131,320 124,800 19,390 14,050 40,290 34,500 200 5,150 315,200 308,500 140,000 140,000 30,000 30,000 53,850 44,250 77,000 83,000 14,350 11,250 i 315,200 308,500 a 2018 $000s H CH Bp Du Financial analysis conducted on PETDAG Plc for 2016, 2017 and 2021 (forecasts). revealed the following ratios: 1 2021 2017 2016 Gross profit margin- 64.6% 68.5% 72.6% (GPM)at 13.2% 16.7% 25.4% Net profit margin (NPM) Acid-test ratio 2.4:1 3.60:1 3.72:1 4-times 5.22 6 times 68 days 5.676 times 65 days 90 days Inventory turnover Receivables collection period Gearing ratio 48% 305 32.5% a Additional information: 1 1.PETDAG's operating expenses include research and development expenses, advertising and promotion expenses, and selling, general and administrative expenses. 1 2.Selling, general and admnistrative expenses for 2019 and 2020 (forecasts) include donations and costs incurred to conduct community projects amounting to $2,400,000 and $3,500,000, respectively. 1 Required: 1 Prepare a report for the directors of PETDAG Plc, that explains: 1 (a) the company's financial performance and financial position for 2018 and 2019. (Gross profit margin; Net profit margin; Acid- test ratio; Inventory. turnover; Receivable collection period; gearing ratio) (25-marks) (b) By examining its cash operating cycle and appropriate working capital ratios, identify the THREE main issues that relate to liquidity and discuss how PETDAG can better manage its working capital to improve its liquidity position. ******** (20 marks)