I need to calculatethe overdraft expected at the end of January 2021

(15 marks)

Relevant information:

In the middle of December 2020 the board of directors of Kidzo has requested the financial director into looking at the working capital management for January 2021. The forecasted financial information at the start of January 2021 is as follows:

1. Trade payables (Cr) 186 700 000

2. Bank Overdraft (Cr) 240 250 000

3. Inventory (Dr) 455 000 000

4. Trade receivables (Dr) 408 350 000

All sales are on credit and they are expected to be R3 500 000 for 2021. Monthly sales are as follows:

November 2020 (actual) 270 875 000

December 2020 (forecast) 300 000 000

January 2021 (forecast) 350 000 000

1. Kidzo plans to pay 70% of trade payables in January 2021 and defer the balance until the end of February 2021. All suppliers of the company require payment within 30 days. Credit purchases from suppliers during January 2021 are expected to be R250 000.

2. Interest of R70 000 is due to be paid in January 2021 on fixed rate bank loan. Operating cash outflows are expected to be R146 500 in January 2021. Kidzo has no cash and relies on its overdraft to finance daily operations. The company has no plans to raise long-term finance during January 2021.

3. Inventory is expected to increase by R52 250 during January 2021.

4. Kidzo has a gross profit margin of 40%. Although Kidzo offers 30 days credit, only 60% of customers pay in the month following purchase, while the remaining customers take an additional month of credit.

5. Assume that each year has 360 days and that Kidzo pays corporation tax at a rate of 30%.