Question 3 Read the following scenario and then answer the questions that follow: A new furniture manufacturing company is needing your help in analysing their financial position. Although small, the business is growing rapidly and will need finances to meet their growth plans. The owners are against taking loans or borrowing funds to finance this growth. Part of their plan is to introduce a new line of outdoor lounge chairs, for which the following figures apply for 2 potential scenarios: Scenario 1 Scenario 2 R1 800 / R1 550 Projected selling price (each). Material costs (each) R800 / R700 Rent R4 000 / R4 000 Salaries R10 000 / R9 000 The following summary figures apply: Current assets: R550 000 Non-current assets: R800 000 Current liabilities: R450 000 Non-current liabilities: R600 000 Owner's equity: R1 800 000 Inventory holdings R155 000 Note: Include formulas, calculation workings and an analysis of your findings in your answers. A)Conduct a breakeven analysis to determine which of the 2 scenarios the business should follow, where the breakeven point (in units) is lowest. B) Use the acid test ratio to evaluate the manufacturer's liquidity position. C) Identify and briefly explain at least four small business sources of financing suitable for the manufacturer.
Question 3 Read the following scenario and then answer the questions that follow:
A new furniture manufacturing company is needing your help in analysing their financial position. Although small, the business is growing rapidly and will need finances to meet their growth plans. The owners are against taking loans or borrowing funds to finance this growth. Part of their plan is to introduce a new line of outdoor lounge chairs, for which the following figures apply for 2 potential scenarios:
Scenario 1 Scenario 2 R1 800 / R1 550 Projected selling price (each). Material costs (each) R800 / R700 Rent R4 000 / R4 000 Salaries R10 000 / R9 000 The following summary figures apply: Current assets: R550 000 Non-current assets: R800 000 Current liabilities: R450 000 Non-current liabilities: R600 000 Owner's equity: R1 800 000 Inventory holdings R155 000 Note: Include formulas, calculation workings and an analysis of your findings in your answers.
A)Conduct a breakeven analysis to determine which of the 2 scenarios the business should follow, where the breakeven point (in units) is lowest.
B) Use the acid test ratio to evaluate the manufacturer's liquidity position.
C) Identify and briefly explain at least four small business sources of financing suitable for the manufacturer.
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