CASE STUDY Information Established Manufacturers $($Pty$)$ Ltd is a South African company specialising in producing and distributing electronic components. The company operates in a highly competitive market and sells its products locally and internationally. The year has been particularly eventful for the company, filled with growth, challenges, and critical decisions that will shape its financial future. Reflections on the Past Year The management team, led by CEO Mr Dlamini, reviewed the company$$s performance and presented the financial statements for Established Manufacturers $($Pty$)$ Ltd for the year ended $30$ June $2025$: Income Statement for the Year Ended $30$ June $2025$ Sales Amount $($R$\text{'}000)$ Cost of Sales $(78,000)120,000$ Gross Profit $42,000$ Operating Expenses $(30,294)$ Depreciation $4,200$ Insurance $6,600$ Salaries and Wages $15,000$ Rent $4,494$ Operating Profit $11,706$ Interest Expense $(3,156)$ Profit Before Tax $8,550$ Income Tax Expense $(30\%)(2,565)$ Net Profit $5,985$ Statement of Financial Position as of $30$ June $2025$ Assets Non$-$Current Assets Amount $($R$\text{'}000)66,800$ Property, Plant, and Equipment $62,000$ Intangible Assets $4,800$ Current Assets $47,000$ Inventory $15,800$ Trade Receivables $20,400$ Cash and Cash Equivalents $10,800$ Total Assets $113,800$ Equity $71,230$ Share Capital $30,000$ Retained Earnings $41,230$ Non$-$Current Liabilities $20,000$ Long$-$term Loan $20,000$ Current Liabilities $22,570$ Trade Payables $15,500$ Short$-$term Loan $7,070$ Total Equity and Liabilities $113,800$ The Road Ahead Looking forward to the next financial year, the management team identified opportunities and challenges. Sales were evenly distributed over the past $12$ months and are expected to grow by $5\%$ in the next financial year, while the cost of sales remains constant at $65\%$ of total sales revenue. Cost pressures are real in the current economy and the following have been identified: $$ Salaries and Wages were incurred evenly throughout the year. However, this is expected to increase by $4\mathrm{.}25\%$ after the anticipated industry$-$wide union negotiations in October $2025.$ Rent is paid quarterly, with the annual $10\%$ increase effective $1$ January $2026.$ Insurance premiums are paid monthly and increase by $8\%$ on $1$ July, each year. Due to planned changes in Established Manufacturers' credit policy, the total value of debtors is expected to double in the financial year. However, the $45-$day payment terms granted to debtors will remain, despite the widely varying payment patterns. $50\%$ of credit sales are collected within $30$ days. $30\%$ are collected within $60$ days. $5\%$ are written off as bad debts. $15\%$ of sales are cash sales, with a $1\%$ discount offered. Purchases are linked to sales, with monthly purchases equal to $50\%$ of monthly sales. $65\%$ of purchases are made on credit, with $60-$day payment terms. The balance is paid for in cash.