Fimba Upoke Ltd plans to expand its business operations by opening several new outlets at a cost of K8m, financed by an issue of loan notes. The company generates credit sales of K80.768m before Cost of sales of K27.700m. All sales are on credit. The current statement of financial position of Fimba Upoke is as follows: Assets Non-current assets Current assets Inventory Trade receivables Cash Total current assets Total assets Equity and liabilities Equity Reserves Total equity Non-current liabilities Current liabilities Trade payables Overdraft Total current liabilities Total equity and liabilities '000 54,070 Inventory holding period Trade receivable collection period Trade payables payment period 4,000 12,320 800 17,120 71,190 6,000 34,000 40,000 18,000 Fimba Upoke Ltd expects that the expansion will increase credit sales by 18.7%, with cost of sales being 33% of credit sales and profit after tax being K6.818m. Non-current assets will increase by 11%. Required Using the information provided: (a) (i) (ii) 9,690 3,500 13,190 71,190 The bank has demanded that Fimba Upoke's overdraft be reduced to K3m, and the company expects its cash balance to be K700,000 after the expansion. 1 Fimba Upoke has been receiving complaints from its suppliers about late payment and the company plans to improve its working capital management as part of its expansion: it expects that the following working capital ratios will result: (i) (ii) The finance director of the company wishes to investigate how the expansion will change the Following ratios: (a) trade payables payment period (b) current ratio: and (c) revenueet working capital ratio (defining net working capital as inventory plus trade receivables less trade payables). Assume there are 360 days in a year. 50 days 60 days 60 days Prepare a forecast statement of financial position for Fimba Upoke Ltd; and Calculate the effect of the proposed expansion on the working capital ratios listed by the finance director. (b) Discuss the ways in which implementing the proposed changes in working capital represent: Changes in working capital investment policy for Fimba Upoke Ltd. Changes in working capital funding policy for Fimba Upoke Ltd.

Fimba Upoke itd plans to ogand its business coentions by opening several new outlets at a cost of KSBm, financed by an issue of loan notes. The compony generates oedt sales of KBO,768m before Cost of sales of K27.700m. All seics are on orede. The aurrent statement of finanoal position of Fimbs Upoke is at follows: Fimba Upole Ltd expects that the opansion wil increase credt soles by 18.7%, wich cost of increase by 11%. The bark has demanded that Fimbe Upoie's overdraht be reduced to KOm, and the company expects its cash balonce to be 1000,000 after the exparsion. Finbe Upoke has been receiving complairts fram is suppliess about late payment and the company plans to improve is working captes manbponert as part of its expansion: it expects that the following working captal ratios will resit: The finance director of the company wishes to imestigate how the exparsion will change the Following ratios: (a) trade payables paymert period (b) current rabioc and (c) revenueet working capital ratio (defining net working capital as imventory plus trade receivacies less trade payables). Assume there are 360 dars in a year. Required Using the information provided: (s) (1) Prepare a forecart statement of froncal posibion for Fimba Upoke Lto; and (ii) Calculate the eflect of the proposed apansion on the working capital ratios listed by the finance director. (b) Descuss the ways in which implementing the proposed ctanges in working capital represent: (1) Changes in working captat imestment policy for Fimba Upoke Lad. (ii) Changes in working capial funding peligy for Finba Upoke ted. Fimba Upoke itd plans to ogand its business coentions by opening several new outlets at a cost of KSBm, financed by an issue of loan notes. The compony generates oedt sales of KBO,768m before Cost of sales of K27.700m. All seics are on orede. The aurrent statement of finanoal position of Fimbs Upoke is at follows: Fimba Upole Ltd expects that the opansion wil increase credt soles by 18.7%, wich cost of increase by 11%. The bark has demanded that Fimbe Upoie's overdraht be reduced to KOm, and the company expects its cash balonce to be 1000,000 after the exparsion. Finbe Upoke has been receiving complairts fram is suppliess about late payment and the company plans to improve is working captes manbponert as part of its expansion: it expects that the following working captal ratios will resit: The finance director of the company wishes to imestigate how the exparsion will change the Following ratios: (a) trade payables paymert period (b) current rabioc and (c) revenueet working capital ratio (defining net working capital as imventory plus trade receivacies less trade payables). Assume there are 360 dars in a year. Required Using the information provided: (s) (1) Prepare a forecart statement of froncal posibion for Fimba Upoke Lto; and (ii) Calculate the eflect of the proposed apansion on the working capital ratios listed by the finance director. (b) Descuss the ways in which implementing the proposed ctanges in working capital represent: (1) Changes in working captat imestment policy for Fimba Upoke Lad. (ii) Changes in working capial funding peligy for Finba Upoke ted