FORMATIVE ASSESSMENT 1 [100 MARKS] Read the CASE Study below and answer ALL questions that follow 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 intemationally. 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 CEQ Mr Dlamini, reviewed the company's perfomance 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 cE Sales 120,000 Cost of Sales (78,000) Gross Profit 42,000 Operating Expenses (30,2594) Depreciation Insurance Salaries and Wages Rent Operating Profit 11,706 Interest Expense (3,756) Profit Before Tax 8,550 Income Tax Expense (305) (2,565) as Statement of Financial Position as of 30 June 2025 Non-Current Assets Property, Plant, and Equipment intangible Assets Current Assets Inventory Trade Receivables Cash and Cash Equivalents Total Assets Equity Share Capital Retained Eamings Non-Current Liabilities Long-term Loan Current Liabilities Trade Payables Short-term Loan Total Equity and Liabilities The Road Ahead Amount (R000) 66,800 62,000 4500 47,000 15,800 20.400 10,800 741,230 30,000 44230 20,000 20,000 22,570 15,500 7,070 Locking 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: Salanes and Wages were incurred evenly throughout the year. However, this is expected to increase by 4.25% after the anticipated industry-wide union negotiations in October 2025. Rentis 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. Que 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 pattems. * 90% of credit sales are collected within 30 days. 30% are collected within 60 days. 59) 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. The total trade creditors at the end of the financial year are envisaged to increase by R44m YOY, while the opening inventory as of 1 July 2026 is expected to be Rim more than 1 July 2025. Anew project will commence in January 2026, with a capital investment of R1.2 million to be made ina new truck. While a 12% cash deposit is required 30 days prior, the first repayment for the truck will be on 1 July 2026. Old equipment with a zero-book value will be sold in October 2025 for R800,000, with payment terms of 30 days after the sale. The company maintains a depreciation policy of 10% per annum on a straight-line basis. The short-term loan will be extinguished by October 2025, while the term loan with Home Bank has an annual repayment of RSm due on 31 March 2026. The total interest expense for FYE 2026 is expected to rise by 6% Based on the review and discussion, the CFO projected an unfavourable bank balance of R1 37 350 at the end of October 2025. He also mentioned that given the loyalty and support of the shareholders, itis anticipated a dividend of 65 cents per share will be declared and paid out in the financial year. Established Manufacturers (Pty) Ltd has an authorised share capital of 800 000 ordinary shares of which 690 000 have been issued. 3.1 Established Manufacturers (Pty) Ltd Projected Statement of Financial Position as at 30 June 2026 ASSETS R Non- current assets R61 740 000 Property, Plant and Equipment (62 000 000 + 1 200 000 - 6 R56 940 000 260 000) Intangible assets R4 800 000 Current assets R57 600 000 Trade receivables (20 400 000 x 2) R40 800 000 Inventory (15 800 000 + 1 000 000) R16 800 000 Total assets R119 340 000 Equity and laibilities Equity R76 340 683 Share capital R30 000 000 Retained Earnings (R41 230 000 + 5 559 183 - (0.65 x R690 R46 340 683 000) Non-current assets R15 000 000 Long-term loan (20 000 000 - 5 000 000) R15 000 000 Current liabilities R27 999 317 Trade payables (15 500 000 + 4 400 000) R19 900 000 Bank overdraft R8 099 317 Total equity and liabilities R119 340 00032 Identify and discuss five (5) potential sources of finance that a project manager may consider for funding a project. Explain each source's advantages, implications, and suitability in different project Scenarios. (70 marks)