2. Leicester Pirates, a local football club that you have supported since childhood, are going through a very difficult period, on and off the field of play. The son of the club chairman was a classmate of yours during your recent PDM Finance course and he was very impressed by how you led the class through many financial debates. He has recommended to his Dad that they enlist your services to assist the club to manage some of their financial challenges. Although you are not being paid for the assignment, your fierce loyalty to the club means that you cannot say no to them in their hour of need. Like any good financial analyst, you call for the latest cash flow statement of the club. The following information is sent to you

Leicester Pirates Football Club Statement of Cash Flows For the period 1/6/2021 to 31/05/2022 Cash at the beginning of the Period 10,345,000

Cash Flow from Operating Activities: (2,210,000)

Net Income after tax 1,245,000

Add: Depreciation 385,000

Increase in Accounts Receivable (2,300,000)

Decrease in Accounts Payable (1,540,000)

Cash Flow from Investing Activities: (7,500,000)

Capital Expenditures (players purchased) (5,000,000)

Purchase of new training facility (2,500,000)

Cash flow from Financing Activities: (3,000,000)

Repayment of Borrowings (1,000,000)

Dividends Paid (2,000,000)

Cash at the End of the period (2,635,000)

a) Comment on the effectiveness with which the club is managing its net working capital. (3)

b) The club is determined to spend approximately R5m on new players over the coming months to improve the results of the club. On the evidence of the cash flow provided, can the club afford this? Advise two avenues that would be possibly open to the club to fund such acquisitions?

c) The club has signed a long term agreement to revamp its training facilities. The first step was to purchase the new facility (as shown on the cash flow), and another R5m has been committed to be spent in 2023 to buy new equipment for the facility. Would you recommend the club goes ahead with its plans? Motivate your answer with concrete things the club can do to follow your advice. (4)

d) From the information provided on the Financing activities of the club on the cash flow, comment on what possible steps the club could take to raise cash on this front. (5)