TARGET CASH AND CARRY (PTY) LTD (TARGET) Target is a food, general and household goods retailer located in Eldoraigne, Centurion and has been in operation for 15 years. The business Target sells food, general and household goods and also operates a bakery and butchery in the shop. A small section of the premises is sub-let to a lock and key business. The financial manager indicated that Target is expecting annual growth of 8% per annum from 2017 after the upgrade of the kitchen and butchery. Target has a long-term lease agreement for the premises, which will expire at the end of 2030. The outlay of the shop can be compared with its competitors i.e. Spar, Checkers and Pick n Pay. Concerns and current insurance policy The store experienced significant business interruption events recently and approached the insurance broker to advice on updating the business interruption section of an existing policy. The CRO insisted on having the policy updated early in the new financial year, which will be on 1 January 2017. The MPL (Maximum Potential Loss) is assessed as the total loss resulting from a potential fire that destroys the entire premises/business. The renewal date of the insurance policy coincides with the financial year. The Plant, Machinery, Stock and Contents are insured under a Fire Section, and the Business Interruption section follows the Fire section. Reinstatement can take up to 12 months, with business normalisation potentially another 6 months, so one should consider at least an 18-month indemnity period.

Calculate the total estimated business interruption coverage amount based on the financial statements below. Show all your calculations.

[15 Marks] TARGET CASH AND CARRY (PTY) LTD (TARGET) Target is a food, general and household goods retailer located in Eldoraigne, Centurion and has been in operation for 15 years. The business Target sells food, general and household goods and also operates a bakery and butchery in the shop. A small section of the premises is sub-let to a lock and key business. The financial manager indicated that Target is expecting annual growth of 8% per annum from 2017 after the upgrade of the kitchen and butchery. Target has a long-term lease agreement for the premises, which will expire at the end of 2030. The outlay of the shop can be compared with its competitors i.e. Spar, Checkers and Pick n Pay. Concerns and current insurance policy The store experienced significant business interruption events recently and approached the insurance broker to advice on updating the business interruption section of an existing policy. The CRO insisted on having the policy updated early in the new financial year, which will be on 1 January 2017. The MPL (Maximum Potential Loss) is assessed as the total loss resulting from a potential fire that destroys the entire premises/business. The renewal date of the insurance policy coincides with the financial year. The Plant, Machinery, Stock and Contents are insured under a Fire Section, and the Business Interruption section follows the Fire section. Reinstatement can take up to 12 months, with business normalisation potentially another 6 months, so one should consider at least an 18-month indemnity period. Calculate the total estimated business interruption coverage amount based on the financial statements below. Show all your calculations. Audited financial statements The financial statements are presented below [TOTAL: 50 MARKS] 2 TARGET CASH AND CARRY (PTY) LTD STATEMENT OF FINANCIAL POSITION AS AT 2016/12/31 Note(s) 2015/12/31 2016/12/31 Assets Non-Current Assets Properly, plant and equipment Loans to directors Deferred tax R 1 640 944 R 2 105 277 R 1 772 712 R 4161 390 R 642 R 5 934 744 R 3 746 221 Current Assets Inventories Trade and other receivables Current tax receivable Cash and cash equivalents R 3 663 872 R 1 321 089 R 340 R3 116 766 R 743 082 R 340 R 33 340 R 3 893 528 R 9 828 272 R 4985 301 R 8 731 522 Total Assets Equity and Liabilities Share capital and reserves Share capital Retained Income R 100 R 909 891 R 909 991 R 100 R 916 948 R 917 048 Liabilities Non-Current Liabilities Other financial liabilities Deferred tax R 1 803 739 R 447 452 R2 251 191 R 2 541 768 R 417 389 R2 959 157 Current Liabilities Trade and other payables Other financial liabilities Bank overdraft R 5 309 923 R 642 164 R 4 343 289 R 1 010 351 R 206 700 R 5 560 340 R7 811 531 R 8 721 522 Total Liabilities Total Equity and Liabilities R 5 952 087 R 8911 244 R9 828 292 Open Rubric STATEMENT OF COMPREHENSIVE INCOME 12 MONTHS ENDED 2015/12/31 2016/12/31 Note(s) Revenue Sale of goods R 69 039 371 R 93 823 318 -R 57 740 986 R 11 298 385 -R 81 429 359 R 12 393 959 Cost of sales Purchases Gross profit Other Income Rental income Interest received Gains on disposal of assets R 7 089 R 9 756 R 14010 R 3767 R 131 042 R 148 819 R 16 845 R 83 448 R 40 017 R 5 206 R 711 698 R 58 141 R 144 195 Operating expenses Accounting fees Advertising Bad debts Bank charges Cleaning Computer expenses Consulting fees Depreciation, amortisation and impairments Donations Employee costs Electricity and water Gencral expenses Insurance Lease rentals on operating lease Legal expenses Levias Motor vehicle expenses Potrol ond oil Postage Printing and stationery Repairs and maintenance Royalties and license fees Security Staff wolfaro Telephone and fax Travel-local R 89 867 R 19 587 R 23 497 R 624 043 R 37 894 R 92 354 R 40 250 R 350 564 R 28 399 R 5 167 616 R 1 323 380 R 41 917 R 172329 R 922 435 R 40 981 R 101 529 R 76 288 R 84 802 R7 819 R 17 497 R 377 506 R 773 306 R 328 438 R 200 101 R 55 110 R 74230 R 11 071 739 R 375 465 -R 351 817 R 23 648 -R 30 705 -R 7057 R 424 349 R 40 130 R 4 869 760 R 1 604 888 R 88 686 R 249 896 R 1 146 742 R 40 250 R 99 564 R 95 607 R 134 097 R & 756 R 21 581 R 749 631 R 759 294 R 335 DDS R 304 771 R 78 844 R 87 391 R 12 181 950 R 228 854 -R 218 319 R 10 535 -R 4597 R5 938 Operating profit Finance costs Profit before taxation Taxation (Loss) profit for the year Other comprehensive income Total comprehensive (loss) Income for the year -R 7 057 R 5 938 Retained income R 911 010 R 5938 Total equity R 911 110 R 5938 STATEMENTS OF CHANGES IN EQUITY Share capital Balance at 2014/01/01 100 Profit for the year Other comprehensive income Total comprehensive income for the year Balance at 2015/01/01 100 Loss for the year Other comprehensive income Total comprehensive loss for the year Balance at 2018/12/31 100 R 5 938 R 916 948 -R 7 057 R 5938 R 917 048 -R 7057 -R 7057 R 909 891 -R 7 057 R 909 991 STATEMENT OF CASH FLOWS Note(s) 12 MONTHS ENDED 2015/12/31 2016/12/31 Cash flows from operating activities Cash receipts from customers Cash pald to suppliors and employees Cash usec generated from operations Interest income Net cash from operating activities R 69 183 758 -R 70 674 275 -R 1 490 517 R3767 -R 1 486 750 R 94 167 962 -R 93 924 428 R 243 534 9,7513 253,290 -R 331 250 -R 192 623 Cash flows from investing activities Purchase of property, plant and equipment Sale of property, plant and equipment Loans to group cornpanies repaid Salo of financial assets Net cash from investing activities R 243 496 R 795 200 R 1 390 000 R 1 992 577 -R 87 754 Cash flows from financing activities Net movement on financial liabilities Repayment of members loan Finance lease payinents Net cash from financing activities -R 369 832 R2 056 113 -R 351 817 R 1334 464 R 1 204 775 -R 3 940 661 -R 218 319 -R 2 954 205 Total cash movement for the year Cash at the beginning of the year Total cash at end of the year -R 24D 040 R 33 340 -R 206 700 -R 708 338 R 741 678 R 33 340 1. PROPERTY PLANT AND EQUIPMENT COST CARRYING VALUE ACCUMULATED DEPRECIATION Leasehold property Plant and machinery Furniture and fixes Motor vehicles R 40 209 R 3 617 666 R 890 701 R 348 524 -R 2 419 329 -R 520 473 -R 184 586 R 40 209 R 1 198 337 R 370 228 R 163 938 R 1 772 712