FORMATIVE ASSESSMENT 4 [100 MARKS] Read the CASE Study below and answer ALL questions that follow CASE STUDY Information Established Manufacturers (Pty) Ltd is a South Afncan company specialising in producing and distributing electronic components. The company operates in a highly competitive market and sells its products locally and intermationally. 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 a ee. Sales 120,000 Cost of Sales (78,000) Gross Profit 42,000 Operating Expenses Depreciation Insurance Salanes and Wages Rent 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 ant) Rona ae Property, Plant, and Equipment 62,000 Intangible Assets 4, Current Assets 47,000 Inventory 15,800 Trade Receivables 20,400 Cash and Cash Equivalents 10,800 Total Assets 113,800 Share Capital 30,000 Retained Earnings Non-Current Liabilities 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 aver the past 12 months and are expected fo 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 4.25% 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. Due to planned changes in Established Manufacturers' credit policy, the total value of debtors is expected to double in the financial year. However, the45-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. + 18% 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 R4.4m 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 fo 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 zera-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 4 straightline basis. The short-term loan will be extinguished by October 2025, while the term loan with Home Bank has an annual repayment of Rm 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 Ri 837 350 at the end of October 2025. He also mentioned that given the loyally 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. QUESTION 1 (25 marks) Using the relevant information provided in the case study, prepare the following for Established Manufacturers (Pty) Lid: 1.1 A Debtors scheduled for November 2025, December 2025, and January 2026 (5 marks) 1.2 A Cash flow projection for November 2025, December 2025, and January 2026 (20 marks)