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solution

The financial statements set out above were extracted from the published accounts Cemetico Ltd a manufacturing

company listed on the local Stock Exchange

Required

You are the Credit Officer BCN a local commercial bank. Cemetico has now approach your institution for credit

support.

(a) Using the current ratio as the only measure, would you have loaned $3,500,000 to this company in 2020? Show

all working using the three-year trend to support your conclusion.

(b) If Cemetico had a fire on January 1, 2021 that destroyed much of its productive capacity that will take about 2

years to rebuild, and 80% of its trade payables represent 75% of the receivables of one of your other customers,

what action would you take as it relates to this latter customer?

(c) Using gross profit margin as the measure for all three years, state whether or not you believe that this company

is operating in a highly competitive market or if it is a monopoly.

(d) Calculate the Altman -Score for the three all three years. Show all workings to support your conclusions (work to

four decimal places).

(el Comment on the Z-score for each of these three years.

(f) Use the result of your Z-score calculations to decide whether or not you would have loaned $3,500,000 to this

company in 2020.

(g) If inflation in 2021 is 6%, do you believe that shareholders who are holding the stock from 2017 are happy? (Hint:

Look the Return on Equity for all three years)

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