QUESTION 3 [20 MARKS] Question 3.1 (7 Marks) Absorb Ltd. sells shock absorbers to mechanical workshops on credit only. The management of the company estimated that it could increase sales by offering better credit terms. Currently, the days sales outstanding (or average collection period) is 12 days. It is expected that this will change to 30 days under the new standards. Sales are expected to increase from R120 million to R180 million. No discounts are offered, and bad debts are currently 1% of sales, but the company expects it to increase to 2% under the new terms. The company can borrow short-term funds at a rate of 6%, invest at the same rate and has a gross profit margin of 15%. Determine whether it would be worthwhile for the company to change its credit terms. Question 3.2 (4 Marks) Fresh Fish Imports Ltd is planning for 2023 and wants to estimate the funds they will require. The company has total assets of R1 600 million, total liabilities of R900 million, sales of R125 million with a net profit margin of 15% and a dividend pay-out ratio of 50%. The company expects sales of R250 million in the 2022 financial year and will pay a special dividend totalling R10 million in 2023. All assets and liabilities are considered spontaneous and increase in line with sales. Assets are currently utilised to their full capacity. Estimate the company's need for funding for 2023. Question 3.3 (9 Marks) Chips Ltd. is currently planning their cash requirements for the next quarter of their financial year, January 2023 to March 2023. The company sells electronic supplies on credit, leading to a constant flow of sales and payments from debtors, with occasional large inflows when goods are supplied for large contracts. The aging report on the accounting system of the company gives the following breakdown of collection from debtors: - 40% one month after the sales have taken place - 60% two months after the sales have taken place - The sales recorded for both November 2022 and December 2022 were R500 000 respectively. Sales are expected to increase to R600 000 in January 2023 and to remain at this level until at least March 2023. Further to this, e-mails from other branches and sales personnel indicate that the company can expect payments from large contracts worth R100 000 in January, R80 000 in February and R200 000 in March (all in 2023)