Financial Planning and Control - 2023S

Unit 2 - Financial projection

Source: 2018 Business Management 3A Resub Assignment: Question 2

REQUIRED

Prepare the Pro Forma Statement of Financial Position as at 31 December 2018 from the information provided below.

INFORMATION

The financial position of Surfers Limited as at 31 December 2017 is reflected below:

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017

	R
ASSETS
Non-current assets	1 800 000
Property, plant & equipment at carrying value	1 500 000
Fixed deposits	300 000
Current assets	5400 000
Inventory	3 400 000
Accounts receivable	2 000 000
Cash and cash equivalents	0
Total assets	R7200000
EQUITY AND LIABILITIES
Equity	4 700 000
Ordinary share capital (150000 shares)	3 600 000
Retained earnings	1 100 000
Non-current liabilities	700 000
Long term loan	700 000
Current liabilities	1 800 000
Accounts payable	1 700 000
Bank overdraft	100 000
Total equity and liabilities	R7200 000

Unit 2 - Financial projection

Source: 17 April 2017 Assignment: Question 2

REQUIRED

Use the following financial data to prepare the Pro Forma Statement of Financial Position as at 31 December 2018.

INFORMATION

Topform Ltd has provided the following financial data needed to prepare the Pro Forma Financial Position as at 31 December 2018.

• Sales for the 2017 totalled R1000000. Sales for 2018 are estimated to be R1 500000.

• The business maintains a cash balance of R50000.

• Inventories, Accounts receivable and Accounts payable for 2018 will represent the same percentage of sales as for 2017.

• Vehicles costing R500000 will be purchased during 2018. Equipment with a cost price of R50000 and Accumulated depreciation of R30000 is expected to be sold for R25000 at the end of June 2018. Total depreciation for 2018 is expected to amount to R140000.

• 25 000 shares at R10 each are expected to be issued during July 2018.

• The business predicts a 14% net profit (after tax) margin. The tax rate of the company is 30%. Ten percent (10%) of the company tax for 2018 is expected to be outstanding (owing) at 31 December 2018.

• A final dividend of 90 cents per share is expected to be declared at 31 December 2018 and it is payable during 2019.

• The balance of the existing loan is expected to be reduced by 30% by means of monthly repayments.

• The amount of external funding (non-current liabilities) must be determined.

Additional information

The following must be taken into account to prepare the Statement of Financial Position as at 31 December 2018:

• Sales are forecast at R20 000 000, with a net profit margin of 10% expected. Forty percent (40%) of the sales are expected to be on credit.

• Accounts receivable are expected to equal 30% of credit sales.

• All purchases of inventories are expected to be on credit and are estimated to total R16 000 000. Ten percent (10%) of this amount is expected to be owed on 31 December 2018.

• Equipment costing R3 000 000 is expected to be purchased on 01 July 2018. An old vehicle with a carrying value of R50 000 is expected to be sold on 31 August 2018. Total depreciation for 2018 is expected to be R500000

• A further R100 000 is expected to be invested in fixed deposit for 2 years on 30 June 2018.

• The loan balance is expected to be reduced by R100000.

• The directors are expected to recommend a final dividend of R1 200 000, payable during 2019.

• A favourable bank balance of 1% of sales is desired.

• Ordinary share capital is expected to remain unchanged.

• The amount of long-term external funding required must be calculated.

Topform Ltd

Statement of Financial position as at 31 December 2017

	R
ASSETS
Non-current assets	1 000 000
Fixed / tangible assets	1000 000
Current assets	900 000
Inventory	600 000
Accounts receivable	250 000
Cash and cash equivalents	50000
Total assets	R1900000
EQUITY AND LIABILITIES
Equity	1400 000
Ordinary share capital (150000 shares)	1200 000
Retained earnings	200 000
Non-current liabilities	300 000
Long term loan	300 000
Current liabilities	200 000
Accounts payable	200 000
Total equity and liabilities	R1900 000