Samson (Pty) Ltd is a South African company that manufactures specialised computer parts for sale throughout...

  

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Samson (Pty) Ltd is a South African company that manufactures specialised computer parts for sale throughout Africa and has experienced rapid growth in recent years Much of this growth has been as a result of launching new products. Despite rapidly increasing revenues, Samson has experienced liquidity pressures as evidenced by a growing overdraft Samson is now dangerously close to breaching its overdraft limit of R9.0 milion Extracts from management accounting information for Samson for the 12 months of trading up to 31 March 2015 are given below Results for 6 months to: 30 September 2014 R'million 9.5 7.1 1.5 Revenue Cost of sales Other costs (all settled as incurred) Balances as at Accounts receivable Accounts payable Inventory Overdraft Working capital days at: Accounts receivable Accounts payable Inventory 31 March 2015 R'million 126 9.6 20 31 March 2015 R'million 7.1 3.2 5.6 8.5 31 March 2015 R'million 103 61 106 30 September 2014 R'million 4.8 27 3.9 6.0 30 September 2014 R'million 92 69 100 The directors proposed to declare a scrip dividend for the current year opposed to a cash dividend in order to ease the pressure on the current cash flow situation For the purposes of this question, taxation should be ignored REQUIRED 3.1 Calculate what the overdraft requirement would have been on 31 March 2015 working capital days for the period had remained at 30 September 2014 levels (5) 32 Explain the particular pressures faced by companies in times of rapid expansion in respect of working capital and profit margins. Illustrate your answer with reference to Samson (8) Samson (Pty) Ltd is a South African company that manufactures specialised computer parts for sale throughout Africa and has experienced rapid growth in recent years Much of this growth has been as a result of launching new products. Despite rapidly increasing revenues, Samson has experienced liquidity pressures as evidenced by a growing overdraft Samson is now dangerously close to breaching its overdraft limit of R9.0 milion Extracts from management accounting information for Samson for the 12 months of trading up to 31 March 2015 are given below Results for 6 months to: 30 September 2014 R'million 9.5 7.1 1.5 Revenue Cost of sales Other costs (all settled as incurred) Balances as at Accounts receivable Accounts payable Inventory Overdraft Working capital days at: Accounts receivable Accounts payable Inventory 31 March 2015 R'million 126 9.6 20 31 March 2015 R'million 7.1 3.2 5.6 8.5 31 March 2015 R'million 103 61 106 30 September 2014 R'million 4.8 27 3.9 6.0 30 September 2014 R'million 92 69 100 The directors proposed to declare a scrip dividend for the current year opposed to a cash dividend in order to ease the pressure on the current cash flow situation For the purposes of this question, taxation should be ignored REQUIRED 3.1 Calculate what the overdraft requirement would have been on 31 March 2015 working capital days for the period had remained at 30 September 2014 levels (5) 32 Explain the particular pressures faced by companies in times of rapid expansion in respect of working capital and profit margins. Illustrate your answer with reference to Samson (8)

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Question 31 Calculate what the overdraft requirement would have been on 31 March 2015 if working capital days for the period had remained at 30 September 2014 levels To determine the overdraft require... View the full answer