Instructions: Please read the questions below carefully and prepare a professional response to it, written in business English and demonstrating a good understanding of the concepts and the application thereof, using credible resources, cited and referenced using the APA style of referencing. Kindly take note that Wikipedia is not a credible source. Groups of 5 students, one must be a student registered as a Business Management student, must be form and submit a joint assignment. Group Leader must include a statement, signed by all the members, that the content done is their own work, that they have cited the original authors when they used material developed by others, and that they abide by the outcome of the submission, having no objection to submitting the assignment through plagiarism software to detect similarities used in the assignment, not accredited to the original authors. Assessment of the assignment: The assignment consists of three components, and each will be assessed separately and jointly. First, the overall presentation, layout and use of business language will be assessed, which counts as 10% of the final mark of the assignment. Secondly, the technical component will be assessed, and it will be based on the mark allocated to each question and sub-question, the response to the questions and the application of theories and concepts. This part will count for 80% of the assignment mark. Lastly, the writing will be adjudged, of which referencing credible sources and critical thinking will be the key aspects. This component will count as 10% of the final assignment mark. According to Wolcott (2020), Critical thinking is the "art of analysing and evaluating thinking with a view to improving it". This inter alia means that you need to identify the problem, gather relevant information for analysis, analyse the information, use relevant knowledge, concepts and techniques, have due regard for the competing interest of various stakeholders and identify or develop appropriate decision criteria, apply it to the information to reach a conclusion and motivate it. P P Swartz Lecturer Question 1 Woodworx Limited ('Woodworx') started operations in 1992 in the Kavango Region in Namibia. The company designs and manufactures timber roof trusses, which are triangular wooden frameworks used in roof construction to support roof decks. Woodworx can source the primary raw material used in manufacturing a roof truss, namely sawn timber, from timber mills close to their factory premises in Rundu. The company has traded successfully over the years due to limited competition and the ability to source timber at reasonable prices. It has become the leading supplier of timber roof trusses in the Kavango West Region. Woodworx has expanded operations by opening branches in other regions. These branches are responsible for marketing, customer relations and order processing within their regions. All products are sourced by branches from the Woodworx factory in Rundu. Recent performance Woodworx performed exceptionally well in the years leading up to and including the financial year ending 31 March 2020 as a result of the boom in the construction industry. However, revenue declined steadily during the second half of 2020 and in its 2021 financial year ('FY2021'), resulting in the company reporting its lowest profits in five years. The decline was mainly due to the continued decrease in sales volumes which the entire construction industry has experienced and the effect of the Covid-19 pandemic on the economy of the country and the world. The directors of Woodworx are concerned about the company's investment in working capital. Woodworx has made a concerted effort to reduce inventory levels in line with reduced demand. There has been a decrease in cash customers (cash sales as a percentage of total sales decreased from 25\% in FY2020 to 15\% in FY2021), while credit customers have taken longer to pay. Furthermore, creditors have demanded the settlement of outstanding accounts within a shorter period. These factors have resulted in an increased investment in working capital. The company increased its overdraft facility with its commercial bankers on 1 April 2020 from N\$250 000 to N\$1 000000 . The overdraft bears interest at 2% per annum above the prevailing quoted prime overdraft lending rate (currently 9% per annum). Two of the conditions of the Page 3 of 7 overdraft facility are that Woodworx must have an interest cover ratio of five times or more and that its debt: equity ratio not exceed 50%. Extracts from Woodworx's most recent annual financial statements are presented below: Page 4 of 7 New business opportunity Woodworx was recently approached by Great Builders Limited ('GBL'). which obtained a government contract to renovate government buildings in the northern regions. The contract period is three years, and GBL intends to purchase all the roof trusses required to replace the buildings' roofs from Woodworx. Only one shape and size of roof truss is needed for this contract, namely the WW100. GBL requires a discount of 5% on the normal selling price of WW100 roof trusses, which are currently quoted at N$500 each. Furthermore, GBL requires that Woodworx has sufficient inventory of the WW100 truss to ensure it can deliver to any destination within the Northern region within 48 hours of an order being placed. Woodworx is under pressure to make a final decision on the GBL opportunity, as the start date of the local government contract is 1 November 2022. Woodworx will have to purchase two additional trucks dedicated to delivering the roof trusses to GBL sites at a cost of N\$250 000 per truck. The trucks can be sold at the end of the supply period for N\$85000 each. Woodworx will be able to claim a straight-line wear and tear allowance of 33,3% per annum in respect of the trucks for income tax purposes. Each truck will also require a driver with an expected annual cash cost each of N\$117 000 to the company. GBL has provided the following estimates of roof trusses required during the duration of the contract: The company's factory will have sufficient capacity to manufacture the required roof trusses. Financing options Mr Tembu, the financial manager, estimates Woodworx will need additional funding of N$750000 to pursue the GBL opportunity. The commercial bankers of Woodworx have indicated that they are not prepared to advance an additional NS750 000 to Woodworx, given their current exposure to the company. Although the Board of Directors of Woodworx has explored various financing options, only one option is available at present. Mr Sheya, a friend of Mr Tembu, has offered to advance a loan of N\$1 million (the minimum amount he is prepared to lend) to Woodworx subject to the following terms and conditions: The loan will bear interest at a fixed rate of 12% per annum, payable semi-annually in arrears; - The capital amount of the loan will be repayable in a single bullet repayment three years after the advance of the loan; and Woodworx will be required to pay an initiation fee of 5% of the loan amount to Mr Sheya upon signature of the loan agreement. Mr Temba is looking for assistance in analysing the current working capital requirements, the past performance, and assessing the funding options, as he declared a conflict of interest to make such a presentation to the Board. Required: 1.1 Review the firm's working capital position and write a memorandum to the Board regarding the past performance, the working capital requirements and assess the funding options in the case and other available options not mentioned in the case above. In the memorandum, advise the Board on possible adjustments that could be made that could improve the cash position of the organisation. (20) 1.2 Identify key business risks to which the company will be exposed if the company decides to enter into a supply arrangement with Great Builders Limited. (10) SAICA (2012) adapted question Instructions: Please read the questions below carefully and prepare a professional response to it, written in business English and demonstrating a good understanding of the concepts and the application thereof, using credible resources, cited and referenced using the APA style of referencing. Kindly take note that Wikipedia is not a credible source. Groups of 5 students, one must be a student registered as a Business Management student, must be form and submit a joint assignment. Group Leader must include a statement, signed by all the members, that the content done is their own work, that they have cited the original authors when they used material developed by others, and that they abide by the outcome of the submission, having no objection to submitting the assignment through plagiarism software to detect similarities used in the assignment, not accredited to the original authors. Assessment of the assignment: The assignment consists of three components, and each will be assessed separately and jointly. First, the overall presentation, layout and use of business language will be assessed, which counts as 10% of the final mark of the assignment. Secondly, the technical component will be assessed, and it will be based on the mark allocated to each question and sub-question, the response to the questions and the application of theories and concepts. This part will count for 80% of the assignment mark. Lastly, the writing will be adjudged, of which referencing credible sources and critical thinking will be the key aspects. This component will count as 10% of the final assignment mark. According to Wolcott (2020), Critical thinking is the "art of analysing and evaluating thinking with a view to improving it". This inter alia means that you need to identify the problem, gather relevant information for analysis, analyse the information, use relevant knowledge, concepts and techniques, have due regard for the competing interest of various stakeholders and identify or develop appropriate decision criteria, apply it to the information to reach a conclusion and motivate it. P P Swartz Lecturer Question 1 Woodworx Limited ('Woodworx') started operations in 1992 in the Kavango Region in Namibia. The company designs and manufactures timber roof trusses, which are triangular wooden frameworks used in roof construction to support roof decks. Woodworx can source the primary raw material used in manufacturing a roof truss, namely sawn timber, from timber mills close to their factory premises in Rundu. The company has traded successfully over the years due to limited competition and the ability to source timber at reasonable prices. It has become the leading supplier of timber roof trusses in the Kavango West Region. Woodworx has expanded operations by opening branches in other regions. These branches are responsible for marketing, customer relations and order processing within their regions. All products are sourced by branches from the Woodworx factory in Rundu. Recent performance Woodworx performed exceptionally well in the years leading up to and including the financial year ending 31 March 2020 as a result of the boom in the construction industry. However, revenue declined steadily during the second half of 2020 and in its 2021 financial year ('FY2021'), resulting in the company reporting its lowest profits in five years. The decline was mainly due to the continued decrease in sales volumes which the entire construction industry has experienced and the effect of the Covid-19 pandemic on the economy of the country and the world. The directors of Woodworx are concerned about the company's investment in working capital. Woodworx has made a concerted effort to reduce inventory levels in line with reduced demand. There has been a decrease in cash customers (cash sales as a percentage of total sales decreased from 25\% in FY2020 to 15\% in FY2021), while credit customers have taken longer to pay. Furthermore, creditors have demanded the settlement of outstanding accounts within a shorter period. These factors have resulted in an increased investment in working capital. The company increased its overdraft facility with its commercial bankers on 1 April 2020 from N\$250 000 to N\$1 000000 . The overdraft bears interest at 2% per annum above the prevailing quoted prime overdraft lending rate (currently 9% per annum). Two of the conditions of the Page 3 of 7 overdraft facility are that Woodworx must have an interest cover ratio of five times or more and that its debt: equity ratio not exceed 50%. Extracts from Woodworx's most recent annual financial statements are presented below: Page 4 of 7 New business opportunity Woodworx was recently approached by Great Builders Limited ('GBL'). which obtained a government contract to renovate government buildings in the northern regions. The contract period is three years, and GBL intends to purchase all the roof trusses required to replace the buildings' roofs from Woodworx. Only one shape and size of roof truss is needed for this contract, namely the WW100. GBL requires a discount of 5% on the normal selling price of WW100 roof trusses, which are currently quoted at N$500 each. Furthermore, GBL requires that Woodworx has sufficient inventory of the WW100 truss to ensure it can deliver to any destination within the Northern region within 48 hours of an order being placed. Woodworx is under pressure to make a final decision on the GBL opportunity, as the start date of the local government contract is 1 November 2022. Woodworx will have to purchase two additional trucks dedicated to delivering the roof trusses to GBL sites at a cost of N\$250 000 per truck. The trucks can be sold at the end of the supply period for N\$85000 each. Woodworx will be able to claim a straight-line wear and tear allowance of 33,3% per annum in respect of the trucks for income tax purposes. Each truck will also require a driver with an expected annual cash cost each of N\$117 000 to the company. GBL has provided the following estimates of roof trusses required during the duration of the contract: The company's factory will have sufficient capacity to manufacture the required roof trusses. Financing options Mr Tembu, the financial manager, estimates Woodworx will need additional funding of N$750000 to pursue the GBL opportunity. The commercial bankers of Woodworx have indicated that they are not prepared to advance an additional NS750 000 to Woodworx, given their current exposure to the company. Although the Board of Directors of Woodworx has explored various financing options, only one option is available at present. Mr Sheya, a friend of Mr Tembu, has offered to advance a loan of N\$1 million (the minimum amount he is prepared to lend) to Woodworx subject to the following terms and conditions: The loan will bear interest at a fixed rate of 12% per annum, payable semi-annually in arrears; - The capital amount of the loan will be repayable in a single bullet repayment three years after the advance of the loan; and Woodworx will be required to pay an initiation fee of 5% of the loan amount to Mr Sheya upon signature of the loan agreement. Mr Temba is looking for assistance in analysing the current working capital requirements, the past performance, and assessing the funding options, as he declared a conflict of interest to make such a presentation to the Board. Required: 1.1 Review the firm's working capital position and write a memorandum to the Board regarding the past performance, the working capital requirements and assess the funding options in the case and other available options not mentioned in the case above. In the memorandum, advise the Board on possible adjustments that could be made that could improve the cash position of the organisation. (20) 1.2 Identify key business risks to which the company will be exposed if the company decides to enter into a supply arrangement with Great Builders Limited. (10) SAICA (2012) adapted