Solstice Biotech Ltd. is engaged in the manufacture of advanced diagnostic testing kits, including a rapid screening kit that saw a sharp rise in…

Solstice Biotech Ltd. is engaged in the manufacture of advanced diagnostic testing kits, including a rapid screening kit that saw a sharp rise in demand following a nationwide public-health screening initiative. To meet this surge, production was scaled to a record high, and the company approached Continental Trade Bank for a loan to fund its working capital and investment requirements. Along with its loan proposal and project report, the company submitted its financial statements for the preceding three years, reproduced below. Statement of Profit and Loss ('000) Particulars 2023-24 2024-25 2025-26 Sales - Cash 400 960 1,600 Sales - Credit 3,600 8,640 14,400 Total Sales 4,000 9,600 16,000 Cost of Goods Sold 2,480 5,664 9,600 Gross Profit 1,520 3,936 6,400 General, Administration & Selling Expenses 160 900 2,000 Depreciation 200 800 1,320 Interest Expense (on borrowings) 120 316 680 Profit Before Tax 1,040 1,920 2,400 Tax @ 30% 312 576 720 Profit After Tax 728 1,344 1,680 Balance Sheet ('000) Particulars 2023-24 2024-25 2025-26 Fixed Assets (net of depreciation) 3,800 5,000 9,400 Cash and Cash Equivalents 80 200 212 Accounts Receivable 600 3,000 4,200 Inventories 640 3,000 4,500 Total Assets 5,120 11,200 18,312 Equity Share Capital (₹ 10 each) 2,400 3,200 4,000 Other Equity 728 2,072 3,752 Non-Current Borrowings 1,472 2,472 5,000 Current Liabilities 520 3,456 5,560 Total Equity & Liabilities 5,120 11,200 18,312 Industry Average of Key Ratios As on 31st March 2026, the company's closing balances of accounts receivable and inventories used for the year's turnover computations were ₹ 6,00,000 and ₹ 6,40,000 respectively. Ratio 2023-24 2024-25 2025-26 Industry Avg. Current ratio 2.54 1.80 1.60 2.30 : 1 Acid test (quick) ratio 1.31 0.93 0.79 1.20 : 1 Receivable turnover ratio 6.00 4.80 4.00 7 times Inventory turnover ratio 3.88 3.11 2.56 4.85 times Long-term debt to total debt 73.90% 41.70% 47.35% 24% Debt-to-equity ratio 47.06% 46.89% 64.50% 35% Net profit ratio 18.2% 14.0% 10.5% 18% Return on total assets 14.22% 12.0% 9.17% 10% Interest coverage ratio 9.67 7.08 4.53 10 times Based on the above Case Scenario, answer the following questions: