Using trend analysis and appropriate ratios, analyse the financial statements that have been prepared by the business in the case study. In particular, comment on the following aspects of the company:

• areas of concern in financial performance, focusing mainly on the performance statement

areas of concern in financial health, focusing mainly on both the performance and position statements

	Year to 31 Dec 2024	Year to 31 Dec 2023
	k	k	k	k
Sales revenue		140.1		124.1
Less: cost of goods sold:
Opening inventory of laptops	135.9		125.5
Purchases from IT fairs and auction sites	82.4		50.2
	218.3		175.7
Less closing inventory of laptops	165.6		135.9
Cost of books sold		52.7		39.8
Gross profit		87.4		84.3
Minus operating expenses:
Salaries and other costs (management and office staff)	40.0		0.0
IT seller commission, postage and duty	0.0		12.4
IT seller costs on transfer of inventory	0.0		5.5
Insurance	6.6		5.2
Other postage costs	10.6		2.6
Website and email advertising expenses	20.4		15.1
Depreciation	42.2		28.9
Accounting and legal costs	15.0		5.0
Total operating expenses		134.8		74.7
Operating profit / (loss)		(47.4)		9.6
Minus interest costs:
Interest on bank loan	6.0		7.0
Interest on bank overdraft	10.0		2.1
Total interest costs		16.0		9.1
Profit / (loss) before taxation		(63.4)		0.5
Corporation tax		0.0		0.0
Profit / (loss) after taxation		(63.4)		0.5

	31 December 2024	31 December 2023
	k	k	k	k
Non-current assets
Computers and office equipment		38.1		21.4
Current assets
Inventory	165.6		135.9
Receivables	25.6		15.6
Other current assets	2.0		2.0
Total current assets	193.2		153.5
Current liabilities
Payables	25.6		6.0
Corporation tax	0.0		0.0
Other tax liabilities	7.8		7.4
Bank overdraft	143.9		34.1
Total current liabilities	177.3		47.5
Net current assets/working capital		15.9		106.0
Total assetslesscurrent liabilities		54.0		127.4
Long-term liabilities
Bank loan		50.0		60.0
Net Assets		4.0		67.4
Equity
Share capital		20.0		20.0
Reserve: retained earnings		(16.0)		47.4
Total Equity		4.0		67.4

Using the analysis in your answer to Question 2, comment on the validity of the concerns expressed about the business by Tech Telecom's finance director. What practical steps should now be undertaken to improve the financial performance and financial health of the business?