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Read the Semester Case Study and answer the question below. It is now March 2021 and the financial statements currently being prepared for the year
Read the Semester Case Study and answer the question below. It is now March 2021 and the financial statements currently being prepared for the year ended 31 December following email from An Mutty, Finance Manager: From: An Mutty, Finance Manager To: Finance Office Subject: Suppler issues I need to finalise the financial statements for the year ended 31 December 2020. The following two things have happened in 2021 that may well affect these financial statements and I would like you to let me know how you think these should be treated. 1. On 10 January 2021 there was a small fire in the PEXECO production facility which damaged inventory and a fork-lift truck. On 10 February 2021 one of our suppliers, Jacksters, paid us G$25,000 in settlement of a legal case that we had taken out against them in December 2020. There have been a few issues with suppliers recently, not least, Jacksters, our supplier of graphite. There have been delays in delivery and some of the raw materials that we've received have been of such poor quality that we have had to return them. In addition, some suppliers are not easy to get hold of when things go wrong. I've been asked to make some suggestions about KPIs that we could establish to monitor the performance of our suppliers. I have also been asked to look at some financial information relating to a potential new supplier of graphite called BGF Graphite. So far, I've prepared the attached schedule which shows its working capital days and information about revenue and cash balance and I'd like you to prepare the commentary to go with it. 1) An explanation of how the two events identified above will affect the financial statements for the year ended 31 December 2020. (sub-task (a) = 24% )- CL01/3 2) Suggestions for three key performance indicators (KPIs) that we can establish to monitor the performance of our suppliers. Please include a justification of why each KPI that you suggest is appropriate. (sub-task (b) = 32% - CLO2/3 3) An explanation of BGF Graphite's working capital position based on the information in the attached schedule. Please also explain any risks associated with this position that might affect our decision to use them as a supplier. (sub-task (c) - 44%) - CLO2/3 An Mutty Finance Manager Lottie Graphite FINANCIAL INFORMATION ABOUT BGF GRAPHITE 2020 2020 2019 2018 Industry average BGF Graphite BGF Graphite BGF Graphite Days Days Days Days Operating cycle Inventory days 32 18 31 30 Trade receivable days 39 62 51 35 Trade paya ble days (45) (86) (63) (38) J$000 J$000 J$000 J$000 Revenue 18,268 4,250 2,416 1,234 Cash/ (overdraft) 1,490 (630) 56 825 Activate Windows Other information: of 30
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