Introduction

A Management Accountant at MEDTECH. Four main strategic matters face the board

of directors, for which you have been asked to advise. You have been given the following

limited information from your line manager in preparation for your briefing.

Company background

MEDTECH (PTY) Ltd is a South African-based wholesaler and distributor of medical

consumables, instruments, and equipment. MEDTECH's focus is to bring innovative and

affordable medical supplies to a wide range of healthcare practices in Southern Africa, such

as pharmaceutical, dental, surgical, veterinary and general medical merchandise, to name a

few.

Established in 1989, MEDTECH has built strong relations with over 800 suppliers, offering

over 30 000 products. MEDTECH currently only supplies to registered medical practitioners

and healthcare facilities. All products are procured and brought to a centralized distribution

centre in Midrand, South Africa. Orders are consolidated and delivered to clients by in-house

logistics or third-party courier services.

MEDTECH's shareholders consist of several private medical practitioners, all of whom are still

the founding members. The executive board members consist of some shareholders, while

the non-executive board members are independent. MEDTECH intends to list on the

Johannesburg Stock Exchange (JSE) AltX.

MEDTECH (PTY) LTD Consolidated Statement of Profit or Loss for the year ended 31 December 2022 2022 2021 A'm Rim Revenue 820 771 Cost of sales 537 495 Gross profit 283 276 Operating expenses 125 115 Operating profit 158 161 Finance costs 11 11 Profit before tax 147 150 Tax 25 23 Profit for year 122 127 MEDTECH (PTY) LTD Consolidated Statement of Financial Position at 31 December 2022 2022 2021 R'm R'm Non-Current Assets 229 218 Property, plant and equipment 141 136 Intangible assets 88 82 Current Assets 767 666 Inventory 350 300 Trade receivables 350 300 Bank 67 66 Total Assets 996 BE4 Equity 704 Share capital 100 100 Retained earnings 704 604 Non-Current Liabilities 100 100 Bank loans 100 100 Current Liabilities 92 BO Trade payables 51 47 Deferred tax 41 30 Total Equity and Liabilities 996R million Property, plant and equipment 48 Intangibles Market research: Consultancy fee to confirm the likely demand for direct sales, 2 to be conducted before any further work. Software: Analysis of systems requirements, to be conducted by MEDTECH IT 5 staff. Software: System for the collection and processing of orders, to be written and 40 installed by third-party consultancy. Initial advertising: Build customer awareness of direct sales channel 5 TOTAL 100