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You are provided with the following historical financial information based on 28 February 2019 financial statements of Gruwa Business Enterprise: Gross profit: $8 400 000
You are provided with the following historical financial information based on 28 February 2019 financial statements of Gruwa Business Enterprise: Gross profit: $8 400 000 Gross Profit Gross profit margin: = 70% Sales Operating income margin: Operating income Sales 5% Debtor collection period: Trade debtors 360 Sales 1 30 days Creditors payment period: Trade creditors 360 x Purchases 1 60 days Stock turnover days: Stock 360 X Cost of sales 1 90 days Gruwa also provides you with the following budget information for the period 1 March 2019 to 28 February 2020: Sales: $14,000,000 Opening stock 1 March 2019: $800,000 Closing stock 28 February 2020: $500,000 Cost of sales: $4,200,000 Operational expenses: $ 8,000,000 Debtor collection: cash = nil, 30 days = 50% and 60 days = 50% Creditor payment: cash = nil, 30 days = 25%, 60 days = 25%, and 90 days = 50%. Use the information above to complete the table and comment on the realism of the budgeted figures of Gruwa by considering the historical figures and the fact that the business is operating in a very competitive market. Historical figure Budgeted figure Comments with reasons Example: Sales 12,000,000 14,000,000 Unrealistic. Huge growth if market is competitive. Cost of sales Gross profit Operational expenses Operating profit Stock turnover period
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