Question 1 — Financial Analysis, Planning & Budgeting (Marks: 60)

This case study covers the goals of financial management, financial ratio analysis, and comparative analysis of financial statements.

At the end of this specific question, students should be able to:

LU1 – Theme 1 Please ensure you research as much as possible on some of the questions in this task. Consult widely beyond the prescribed textbook and give additional information in terms of the information to be used in answering the questions. Some sources you can consult are YouTube videos, Open Education Resources, etc. Make sure you give references to justify the answers or methods of calculation.

• LO1: Explain what financial management is and why it is important for organisations.

• LO2: Identify the main functions and goals of financial management.

LU2-Theme 3

• LO7: Calculate and interpret financial ratios to assess the profitability, liquidity, solvency, and efficiency of an organisation.
• LO8: Classify and compare financial ratios into different categories, such as profitability ratios, liquidity ratios, solvency ratios, and efficiency ratios.

LU2-Theme 4

• LO11: Compare and contrast the financial performance and position of an organisation with its peers and industry benchmarks using financial data and ratios.

Please study the following case study and answer the questions below.

Seven years ago, after 15 years in financial management, Sicelo Nkosi resigned his position as manager of financial management systems for Bonani Accounting Systems and started Lula Accounting Systems (Pvt) Ltd. In the two years preceding his departure from Bonani Accounting Systems, Sicelo had spent nights and weekends developing a sophisticated cost-accounting software programme that became Lula’s initial product offering. As the firm grew, Sicelo planned to develop and expand the software product offerings, all of which would be related to streamlining the accounting processes of medium- to large-sized manufacturers.

Although Lula experienced losses during its first two years of operation—2016 and 2023—its profit has increased steadily from 2022 to the present (2023). The firm’s profit history, including dividend payments and contributions to retained earnings, is summarised in Table 1.

Sicelo started the firm with a R100,000 investment: his savings of R50,000 as equity and a R50,000 long-term loan from the bank. He had hoped to maintain his initial 100 percent ownership in the corporation, but after experiencing a R50,000 loss during the first year of operation (2016), he
sold 60 percent of the shares to a group of investors to obtain needed funds. Since then, no other share transactions have taken place. Although he owns only 40 percent of the firm, Sicelo actively manages all aspects of its activities; the other shareholders are not active in the management of
the firm. The firm’s share was valued at R4.50 per share in 2022 and at R5.28 per share in 2023.

TABLE 1

Lula Accounting Systems (Private) Limited

Profit, Dividends, and Retained Earnings, 2019–2023

Sicelo has just prepared the firm’s 2023 income statement, balance sheet, and statement of retained earnings, shown in Tables 2, 3, and 4, along with the 2022 balance sheet. In addition, he has compiled the 2022 ratio values and industry average ratio values for 2022, which are applicable to both 2022 and 2023 and are summarised in Table 5. He is quite pleased to have achieved record earnings of R48,000 in 2023, but he is concerned about the firm’s cash flows. Specifically, he is finding it more and more difficult to pay the firm’s bills in a timely manner and generate cash flows for investors, both creditors and owners.

To gain insight into these cash flow problems, Sicelo is planning to determine the firm’s 2023 operating cash flow (OCF) and free cash flow (FCF).

Sicelo is further frustrated by the firm’s inability to afford to hire a software developer to complete development of a cost estimation package that is believed to have “blockbuster” sales potential. Sicelo began development of this package 2 years ago, but the firm’s growing
complexity has forced him to devote more of his time to administrative duties, thereby halting the development of this product. Sicelo’s reluctance to fill this position stems from his concern that the added R80,000 per year in salary and benefits for the position would certainly lower the firm’s earnings per share (EPS) over the next couple of years. Although the project’s success is in no way guaranteed, Sicelo believes that if the money were spent to hire the software developer, the
firm’s sales and earnings would significantly rise once the 2- to 3-year development, production, and marketing process was completed.

With all these concerns in mind, Sicelo set out to review the various data to develop strategies that would help ensure a bright future for Lula Software. Sicelo believed that as part of this process, a thorough ratio analysis of the firm’s 2023 results would provide important additional insights.

a. (1) On what financial goal does Sicelo seem to be focusing? Is it the correct goal?

Why or why not?

(2) Could a potential agency problem exist in this firm? Explain.
b. Calculate the firm’s earnings per share (EPS) for each year, recognising that the number of shares of ordinary shares outstanding has remained unchanged since the firm’s inception.

(8)

(5) (14)

Comment on the EPS performance in view of your response in part a. (2)

c. Use the financial data presented to determine Lula’s operating cash flow (OCF) and

free cash flow (FCF) in 2023.

(12)

Evaluate your findings in light of Track’s current cash flow difficulties. (4)

d. Analyse the firm’s financial condition in 2023 as it relates to (1) liquidity, (2) activity, (3) debt, (4) profitability, and (5) market, using the financial statements provided in Tables 2 and 3 and the ratio data included in Table 5. Be sure to evaluate the firm on both a cross-sectional and a time-series basis.
e. What recommendation would you make to Stanley regarding hiring a new software developer? Relate your recommendation here to your responses in part a.
Table 2:

Table 3:

Question 2 — Risk, Return and Share Valuation (Marks: 50)

At the end of this specific question, students should be able to: LU1 – Theme 1

• LO3: Understand the key financial concepts and principles, such as time value of money, risk and return, and cashflow techniques to evaluate investments.

LU5 – Theme 3

• LO7: Understand the concept of leverage and its impact on an organization’s risk and return.
• LO9: Apply the concept of leverage to real-world scenarios to assess the risk and return of different financing options.

Please study the following case study and answer the questions below. Integrated Case Study 2 – Isiqoko International
In the world of trendsetting fashion, instinct and marketing savvy are prerequisites to success. Rich Mnisi had both. During 2023, his international casual-wear company, Isiqoko, rocketed to R300 million in sales after 10 years in business. His fashion line covered the young woman from head to toe with hats, sweaters, dresses, blouses, skirts, pants, sweatshirts, socks, and shoes. In Sandton, there was an Isiqoko shop every five or six blocks, each featuring a different colour. Some shops showed the entire line in mauve, and others featured it in canary yellow.

Isiqoko had made it. The company’s historical growth was so spectacular that no one could have predicted it. However, securities analysts speculated that Isiqoko could not keep up the pace. They warned that competition is fierce in the fashion industry and that the firm might encounter
little or no growth in the future. They estimated that stockholders also should expect no growth in future dividends.

Contrary to the conservative securities analysts, Rich Mnisi felt that the company could maintain a constant annual growth rate in dividends per share of 6% in the future, or possibly 8% for the next
2 years and 6% thereafter.

Rich based his estimates on an established long-term expansion plan into European and Latin American markets. Venturing into these markets was expected to cause the risk of the firm, as measured by beta, to increase immediately from 1.10 to 1.25.

In preparing the long-term financial plan, Isiqoko’s chief financial officer has assigned a junior financial analyst, Thato Nthebe, to evaluate the firm’s current stock price. He has asked Thato to consider the conservative predictions of the securities analysts and the aggressive predictions of the company founder, Rich Mnisi.

Rich Mnisi has compiled these 2023 financial data to aid his analysis:

Data item 2023 value

Earnings per share (EPS) R6.25

Price per share of Ordinary R40.00

Book value of Ordinary share R60,000,000

Total Ordinary share outstanding 2,500,000

Ordinary share dividend per share R4.00

Data Points

Required

a. What is the firm’s current book value per share? (3)

b. What is the firm’s current P/E ratio? (3)

c. (1) What are the required return and risk premiums for Isiqoko shares using the capital asset pricing model, assuming a beta of 1.10? (Hint: Use the security market line—with data points noted—given in Figure 1 to find the market return.)
[4 Marks]

(2) What are the required return and risk premiums for Isiqoko shares using the

capital asset pricing model, assuming a beta of 1.25? [4 Marks]

(3) What will be the effect on the required return if the beta rises as expected?

[1 Mark]

d. If the securities analysts are correct and there is no growth in future dividends, what

will be the value per share of the Isiqoko share? (Note: Beta_1.25.)

e. (1) If Rich Mnisi’s predictions are correct, what will be the value per share of Isiqoko’s share if the firm maintains a constant annual 6% growth rate in future dividends? (Note: Beta is 1.25.) [5 Marks]
(2) If Rich Mnisi’s predictions are correct, what will be the value per share of Isiqoko if the firm maintains a constant annual 8% growth rate in dividends per share over the next 2 years and 6% thereafter? (Note: Beta_1.25.) [17 Marks]
f. Compare the current (2023) share price and the share values found in parts a, d, and e. Discuss why these values may differ. Which valuation method do you believe most clearly represents the true value of the Isiqoko share?

Question 3 — Investment and Capital Budgeting Decisions (Marks: 100)

At the end of this specific question, students should be able to: LU1 – Theme 1
• LO3: Understand the key financial concepts and principles, such as time value of money, risk, and return, and cashflow techniques to evaluate investments.

LU4 – Theme 2

• LO3: Learn how to use the net present value (NPV) to evaluate investment decisions.

• LO4: Understand the internal rate of return (IRR) and its application in capital budgeting.

• LO5: Know how to calculate the payback period for an investment.

• LO6: Learn how to use the profitability index to evaluate investment decisions.

LU4 – Theme 4

• LO11: Learn how to deal with capital rationing in investment decisions.

• LO12: Understand the importance of project sequencing in capital budgeting.

• LO13: Know how to handle mutually exclusive projects in investment decisions.

Please study the following case study and answer the questions below.

Integrated Case study 3 – Zinhle Iziboni (ZI) Company

Zinhle Iziboni (ZI) Company is a medium-sized commercial printer of promotional advertising brochures, booklets, and other direct-mail pieces. The firm’s major clients are Johannesburg– and Cape Town based ad agencies. The typical job is characterized by high quality and production runs of over 50,000 units. ZI has not been able to compete effectively with larger printers because of its existing older, inefficient presses. The firm is currently having problems cost effectively meeting
run length requirements as well as meeting quality standards.

The general manager has proposed the purchase of one of two large six-colour presses designed for long, high-quality runs. The purchase of a new press would enable ZI to reduce its cost of labour and therefore the price to the client, putting the firm in a more competitive position. The key financial characteristics of the old press and of the two proposed presses are summarised in what follows.

Old press Originally purchased 3 years ago at an installed cost of R400,000, it is being depreciated under MACRS using a 5-year recovery period. The old press has a remaining economic life of 5 years. It can be sold today to net R420,000 before taxes; if it is retained, it can be sold to net R150,000 before taxes at the end of 5 years.
Press A This highly automated press can be purchased for R830,000 and will require R40,000 in installation costs. It will be depreciated under MACRS using a 5-year recovery period. At the end of the 5 years, the machine could be sold to net R400,000 before taxes. If this machine is acquired, it is anticipated that the following current account changes would result.

Press B This press is not as sophisticated as press A. It costs R640,000 and requires R20,000 in installation costs. It will be depreciated under MACRS using a 5-year recovery period. At the end of
5 years, it can be sold to net R330,000 before taxes. Acquisition of this press will have no effect on the firm’s net working capital investment.
Cash +R25,400

Accounts receivable +120,000

Inventories – 20,000

Accounts payable + 35,000

Press B This press is not as sophisticated as press A. It costs R640,000 and requires R20,000 in installation costs. It will be depreciated under MACRS using a 5-year recovery period.
At the end of 5 years, it can be sold to net R330,000 before taxes. Acquisition of this press will have no effect on the firm’s net working capital investment.

Profits Before Depreciation and Taxes for Lasting Impressions Company’s Presses

Year                Old press                  PressA                       PressB

1                      R120,000                  R250,000                  R210,000

2                        120,000                      270,000                    210,000

3                        120,000                    300,000                      210,000

4                        120,000                    330,000                      210,000

5                        120,000                    370,000                      210,000

The firm estimates that its profits before depreciation and taxes with the old press and with press A or press B for each of the 5 years would be as shown in Table 1. The firm is subject to a 40% tax rate on both ordinary income and capital gains. The firm’s cost of capital, k, applicable to the
proposed replacement is 14%.

Required:

a. For each of the two proposed replacement presses, determine:

(1) Initial investment. [18 marks]

Operating cash inflows. (Note: Be sure to consider the depreciation in year 6.)

[30 marks]

(2) Terminal cash flow. (Note: This is at the end of year 5.) [16 Marks]

b. Using the data developed in part a, find and depict on a timeline the relevant cash flow stream associated with each of the two proposed replacement presses, assuming that each is terminated at the end of 5 years.
c. Using the data developed in part b, apply each of the following decision techniques: (1) Payback period. (Note: For year 5, use only the operating cash inflows—that
is, exclude terminal cash flow—when making this calculation.) [7 marks]

(2) Discounted payback period [5 marks]

(3) Net present value (NPV). [7 marks]

(4) Internal rate of return (IRR). [6 marks]

(64)

d. Draw net present value profiles for the two replacement presses on the same set of axes, and discuss conflicting rankings of the two presses, if any, resulting from use of NPV and IRR decision techniques.
e. Recommend which, if either, of the presses the firm should acquire if the firm has

(1) unlimited funds or (2) capital rationing.

f. What is the impact on your recommendation of the fact that the operating cash inflows associated with press A are characterised as very risky in contrast to the low- risk operating cash inflows of press B?

Question 4 — Financing and Capital Structure Decisions (Marks: 90)

At the end of this specific part, students should be able to: Theme 1
• LO2: Evaluate the trade-offs between profitability, risk, growth, and flexibility in capital structure decisions.
• LO3: Apply the concepts of profitability, risk, growth, and flexibility to real-world scenarios to make informed financing and capital structure decisions.

Theme 2

• LO5: Calculate the weighted average cost of capital (WACC) for different capital structures.

• LO6: Apply the concepts of optimal capital structure and WACC to real-world scenarios to make informed financing decisions.

Theme 3

• LO7: Understand the concept of leverage and its impact on an organisation’s risk and return.
• LO8: Evaluate the effects of different levels of leverage on an organisation’s financial performance.
• LO9: Apply the concept of leverage to real-world scenarios to assess the risk and return of different financing options.

Theme 4

• LO11: Calculate the optimal payout ratio for an organisation based on its financial

performance and growth prospects.

• LO12: Apply the concepts of dividend policy and payout ratio to real-world scenarios to make informed dividend decisions.

Integrated Case Study 4 – Mashudu Clothing Company

Mashudu Clothing Company was founded nearly 16 years ago when a Venda merchant named Mashudu Rashudu landed in Johannesburg with an inventory of heavy canvas, which he hoped to sell for tents and machine covers to artisanal miners headed for the Randfontein goldfields. Instead, he turned to the sale of harder-wearing clothing.

Mashudu Clothing Company is a small manufacturer of fabrics and clothing whose share is traded in the JSE Alt-X market. In 2022, the Johannesburg-based company experienced sharp increases in both domestic and European markets, resulting in record earnings. Sales rose from R15.9 million
in 2018 to R18.3 million in 2022, with earnings per share of R3.28 and R3.84, respectively.

European sales represented 29% of total sales in 2022, up from 24% the year before and only 3% in 2017, 1 year after foreign operations were launched. Although foreign sales represent nearly one-third of total sales, the growth in the domestic market is excepted to affect the company most significantly. Management expected sales to surpass R21 million in 2023, and earnings per share are expected to rise to R4.40.(Selected income statement items are presented in Table1.)

Because of the recent growth, Minnie Dlamini, the corporate treasurer, is concerned that

available funds are not being used to their fullest potential. The projected R1,300,000 of internally generated 2023 funds is expected to be insufficient to meet the company’s expansion needs. Management has set a policy of maintaining the current capital structure proportions of 25% long- term debt, 10% preferred stock, and 65% common stock equity for at least the next 3 years. In addition, it plans to continue paying out 40% of its earnings as dividends. Total capital
expenditures are yet to be determined.

Dlamini has been presented with several competing investment opportunities by division and product managers. However, because funds are limited, choices of which projects to accept must be made. A list of investment opportunities is shown in Table 2. To analyse the effect of the increased financing requirements on the weighted average cost of capital (WACC), Dlamini contacted a leading investment banking firm that provided the financing cost data given in Table 3. Rashudu is in the 40% tax bracket.

Table 1:

Table 2

Table 3:

Financing Cost Data

Long-term debt: The firm can raise R700,000 of additional debt by selling 10 year, R1000, 12% annual interest rate bonds to net R970 after flotation costs. Any debt in excess of R700,000 will have a before-tax cost, rd, of 18%.

Preferred shares: Preferred shares, regardless of the amount sold, can be issued with a R60 par value and a 17% annual dividend rate. It will net R57 per share after flotation costs.

Ordinary shares: The firm expects its dividends and earnings to continue to grow at a constant rate of 15% per year. The firm’s share is currently selling for R20 per share. The firm expects to have R1,300,000 of available retained earnings. Once the retained earnings have been exhausted, the firm can raise additional funds by selling new common stock, netting R16 per share after under pricing and flotation costs.

To Do

a. Over the relevant ranges noted in the following table, calculate the after-tax cost of each source of financing needed to complete the table. [10 Marks]

b. (1) Determine the break point associated with ordinary shares. A break point represents the total amount of financing that the firm can raise before it triggers an increase in the cost of a particular financing source. For example, Mashudu plans to use 25% long-term debt in its capital structure. That means that for every R1 in debt that the firm uses, it will use R3 from other financing sources (total financing is then R4, and because R1 comes from long-term debt, its share in the total is the desired 25%). From Table 3. We see that after the firm raises R700,000 in long-term debt, the cost of this financing source begins to rise. Therefore, the
firm can raise a total capital of R2.8 million before the cost of debt rises (R700,000 in debt plus R2.1 million in other sources to maintain the 25% proportion for debt). Therefore, R2.8 million is the breakpoint for debt. If the firm wants to maintain a capital structure with 25% long-term debt and also wants to raise more than R2.8 million in total financing, then it will require more than R700,000 in long-term debt, and it will trigger the higher cost of the additional debt it issues beyond R700,000. [7 Marks]

(2) Using the break points developed in Part 1, determine each of the ranges of total new financing over which the firms weighted average cost of capital (WACC) remains constant.
[6 Marks]

(3) Calculate the weighted average cost of capital for each range of total new financing. Draw a graph with the WACC on the vertical axis and total money raised on the horizontal axis, and show how the firm’s WACC increases in steps as the amount of money raised increases.
[15 Marks]

c. (1) Sort the investment opportunities described in Table 2 from highest to lowest return, and plot a line on the graph you drew in Part (3) above showing how much money is required to fund the investments, starting with the highest return, and going to the lowest. In other words, this line will plot the relationship between the IRR on the firm’s investments and the
total financing required to undertake those investments. [11 Marks] (2) Which, if any, of the available investments would you recommend that the firm accept? Explain your answer. [4 Marks]

d. (1) Assuming that the specific financing costs do not change, what effect would a shift to a more highly leveraged capital structure consisting of 50% long-term debt, 10% preferred shares, and 40% ordinary shares have on your previous findings? (Note: Rework parts b and c using these capital structure weights.) [18 Marks] (2) Which capital structure, the original one or this one, seems better? Why? [4 Marks]

e. (1) What type of dividend policy does the firm appear to employ? Does it seem appropriate given the firm’s recent growth in sales and profits and given its current investment opportunities? [7 Marks] (2) Would you recommend an alternative dividend policy? Explain. How would this policy
affect the investments recommended in Part 2? [8 Marks]

Question 5 — Working Capital Management (Marks: 50)

At the end of this specific question, students should be able to: LU6 – Theme 1
• LO2: Evaluate the importance of effective working capital management in ensuring the smooth operation of an organisation.

LU6- Theme 2

• LO4: Understand and explain the concepts of the cash conversion cycle and the operating

cycle.

• LO5: Analyse the impact of these cycles on an organisation’s liquidity and profitability.

• LO6: Apply techniques to manage these cycles effectively in different business contexts.

LU6 -Theme

• LO7: Understand and explain how to determine the optimal levels of cash, inventory, receivables, and payables for an organisation.
• LO8: Evaluate the impact of these levels on the organisation’s working capital and overall financial performance.
• LO9: Apply these principles to real-world scenarios to optimise an organisation’s working capital.

Integrated Case Study 5- Ntofo-Lux Furniture Designs

In January 2004, Thando Thabethe was named treasurer of Ntofo-Lux Furniture Designs. She decided that she could best orient herself by systematically examining each area of the company’s financial operations. She began by studying the firm’s short-term financial activities.

Ntofo-Lux is in Johannesburg South and specialises in a furniture line called “Bantu Moderna.” Of high quality and contemporary design, the furniture appeals to the customer, who wants something unique for his or her home or apartment. Most Bantu Moderna furniture is built by special order, because a wide variety of upholstery, accent trimming, and colours are available. The product line is distributed through exclusive dealership arrangements with well-established retail stores. Ntofo-Lux manufacturing process virtually eliminates the use of wood. Plastic and metal provide the basic framework, and wood is used only for decorative purposes.

Ntofo-Lux entered the plastic-furniture market in late 2010. The company markets its plastic- furniture products as indoor–outdoor items under the brand name “Mafini.” Mafini plastic furniture emphasises comfort, durability, and practicality and is distributed through wholesalers. The Mafini line has been very successful, accounting for nearly 40 percent of the firm’s sales and profits in 2003. Ntofo-Lux anticipates some additions to the Mafini line and some limited change of direction in its promotion in an effort to expand the applications of the plastic furniture.

Ms. Thabethe has decided to study the firm’s cash management practices.

To determine the effects of these practices, she must first determine the current operating and cash conversion cycles. In her investigations, she found that Ntofo-Lux purchases all of its raw materials and production supplies on an open account. The company is operating at production levels that preclude volume discounts. Most suppliers do not offer cash discounts, and Ntofo-Lux usually receives credit terms of net 30. An analysis of Ntofo-Lux’s accounts payable showed that its average payment period is 30 days. Thando consulted industry data and found that the industry average payment period was 39 days. An investigation of six Johannesburg furniture manufacturers revealed that their average payment period was also 39 days.

Next, Thando studied the production cycle and inventory policies. Ntofo-Lux tries not to hold any more inventory than necessary in either raw materials or finished goods.

The average inventory age was 110 days. Thando determined that the industry standard, as reported in a survey done by Furniture Age, the trade association journal, was 83 days.

Ntofo-Lux sells to all of its customers on a net-60 basis, in line with the industry trend to grant such credit terms on specialty furniture.

Thando discovered, by ageing the accounts receivable, that the average collection period for the firm was 75 days. An investigation of the trade association’s and Johannesburg manufacturers’ averages showed that the same collection period existed where net-60 credit terms were given. Where cash discounts were offered, the collection period was significantly shortened. Leal believed that if Ntof-Lux were to offer credit terms of 3/10 net 60, the average collection period could be reduced by 40 percent.

Ntofo-Lux was spending an estimated R26,500,000 per year on operating-cycle investments. Thando considered this expenditure level to be the minimum she could expect the firm to disburse during 2023. Her concern was whether the firm’s cash management was as efficient as it
could be. She knew that the company paid 15 percent annual interest for its resource investment. For this reason, she was concerned about the financing costs resulting from any inefficiencies in
the management of Ntofo-Lux’s cash conversion cycle.

Required:

a. Assuming a constant rate for purchases, production, and sales throughout the year, what are Ntofo-lux’s existing operating cycle (OC), cash conversion cycle (CCC), and resource investment needs?
b. If Thando can optimise Ntofo-Lux’s operations according to industry standards, what will Ntofo-Lux’s operating cycle (OC), cash conversion cycle (CCC), and resource investment need to be under these more efficient conditions?
c. In terms of resource investment requirements, what is the cost of Ntofo-Lux’s operational inefficiency?

d. (1) If, in addition to achieving industry standards for payables and inventory, the firm can reduce the average collection period by offering credit terms of 3/10 net
60, what additional savings in resource investment costs will result from the shortened cash conversion cycle, assuming that the level of sales remains constant? [7 Marks]
(2) If the firm’s sales (all on credit) are R40,000,000 and 45% of the customers are expected to take the cash discount, by how much will the firm’s annual revenues be reduced as a result of the discount? [2 marks]
(3) If the firm’s variable cost of R40,000,000 in sales is 80%, determine the reduction in the average investment in accounts receivable and the 670 annual savings that
will result from this reduced investment, assuming that sales remain constant. (Assume a 360-day year.) [6 Marks]
(4) If the firm’s bad-debt expenses decline from 2% to 1.5% of sales, what annual

savings will result, assuming that sales remain constant? [2 Marks]

(5) Use your findings in parts (2) through (4) to assess whether offering the cash discount can be justified financially. Explain why or why not. [2 Marks]
e. Based on your analysis in parts a through d, what recommendations would you offer

Thando Thabete?
f. Review for Thando Thabete the key sources of short-term financing, other than accounts payable, that she may consider financing Ntofo-Lux’s resource investment need calculated in part b. Be sure to mention both unsecured and secured sources.

Answers to Above Questions on Financial Management

Answer 1: An analysis of the given scenario indicates that the main focus of Sicelo is on achieving multiple financial goals such as control over the ownership, increase in profitability, and cash flow management. The main goal of every organisation is to achieve maximization over the wealth of shareholders, but in the given case, it is identified that the focus of Sicelo is diversified, as it is distributed between profitability, cash flow concerns and maintaining control of the firm.