AFC 2022 23 Third call written test with solutions

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QUESTION 1A ( 4 POINTS) Flex is an Italian company which manufactures and sells shoes mainly in Europe. You know the following data referred to the last fiscal year (ending on December 31st, 2022): Balance Sheet Data (December 31st, 2022) • Total Assets: 669,992 k€ • Property Plant & Equipment: 81,326 k€ • Non-current Intangible assets: 52,061 k€ • Non-current Financial assets: 29,928 k€ • Cash and cash equivalent: 75,616 k€ • Current Financial Assets held for sale or trade: 2,110 k€ • Long-term borrowings: 16,062 k€ • Provisions for liabilities and charges (non-current): 5,110 k€ • Pension and similar obligations (non-current): 2,698 k€ • Other non-current financial liabilities: 7,339 k€ • Current borrowings: 67,064 k€ • Assets held for sale: 0 k€ You also know that the value of trade receivables, inventories, trade payables and other current liabilities is not provided in the text, but it is not negligible. Conversely, all items composing non -current assets and liabilities are provided above. Income statement data (December 31st, 2022) • Revenues: 878,000 k€ • Net profit: 15,383 k€ • Cost Of Goods Sold (COGS): 456,000 k€ (of which, D&A: 15,000 k€) • There are no changes in the value of inventories of finished goods • Other operating income is equal to 0 Accounting-based indicators (December 31st, 2022) • ROE: 4.40% • DSO: 50.03 days • NPM (Net Profit Margin): 1.75% • ROA: 4.50% Based on the available data, which one of the following sentences is CORRECT? A. Although the Current Ratio equals 1.75, Flex might have to face liquidity issues in the short term, as inventories represent the 61% of current assets. B. Current assets are 1.75 times current liabilities, and inventories cover 85% of current assets. C. The Current Ratio is 1.16 and this means ( i.e. guarantees)…