ASSIGNMENT * PROGRAMME: Master of Business Administration in Healthcare
Management * MODULE: Financial Management
QUESTION ONE [30]
The following data appeared in the financial records of PLG Medics Limited:
1. Revenue and expense figures reflected the following:
Actual
Revenue
Purchases
Revenue commission
Wages
Estimated
January
R
February
R
March
R
April
R
May
R
192 000
200 000
800
1 600
240 000
100 000
1 200
1 600
120 000
320 000
2 400
1 600
320 000
168 000
1 600
?
400 000
120 000
800
?
2. Cash transactions:


40% of all revenue are for cash with the balance being on credit.
35% of all purchases are for cash with the balance being on credit.
3. Collections for credit revenue are as follows:
 20% is collected in the month of the revenue and a 2% discount is granted on
these collections.
 60% is collected in the month following the month of revenue.
 15% is collected in the second month following the month of revenue.
 The remaining 5% is written off as bad debts.
4. The company will make an investment of R170 000 in fixed deposit on 01 April. Interest of
R3 500 per month is expected to be received from 30 April.
5. Creditors are paid two months after the date of invoice.
6. Rent expense amounts to R11 000 per month and is payable on the first day of each
month.
7. Wages will be increased by 10% in April and will increase by a further 5% in May.
8. A new machine is expected to be purchased for R30 000 cash on 1 May. Depreciation is
calculated using the straight-line method.
9. Revenue commission is paid in the month following the month in which it was earned.
10. On 31 March the company had a bank overdraft of R5 000.
Required:
1.1 Prepare a Debtors Collection Schedule for April and May. (8)
1.2 Prepare the Cash Budget for April and May. (22)
Note: Use separate columns for each month
QUESTION TWO [20]
CKD Health Ltd is looking to invest in new laboratory equipment. The following information
has been extracted from the reports relating to the equipment:




Investment
Average Annual Profit
Life spans
Minimum required rate of return
R90 000
R26 667
3 years
10%
Cash flows:



1st year
2nd year
3rd year
R20 000
R400 000
R110 000
Required:
2.1 Calculate the accounting rate of return (express the answer to two decimal places). (3)
2.2 Calculate the payback period (answer in years, months and days). (4)
2.3 Calculate the net present value (round off amounts to the nearest Rand). (6)
2.4 Would the project be acceptable at a cost of capital of 12%? Motivate your answer
with an appropriate calculation that takes into consideration the time value of money. (7)
Note: Use the following discount factors where applicable:
Year
1
2
3
10%
0.9091
0. 8264
0.7513
12%
0.8929
0. 7972
0.7118
QUESTION THREE [20]
3.1 Analyse solid waste as a risk management issue in healthcare. (12)
3.2 Evaluate the Relativist argument as a source of ethics. (8)