Accounting for Managers - RFG

ACCOUNTING FOR MANAGERS
RFG
STUDENT ID:
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Question 1
The relevant input computations for the cash cycle are given below.
Extract from cash flow statement (RFG, 2017).

Cash Flow From Operating Activities – This has declined in FY2017 by about $1million
which could be attributed to the higher tax outflow in FY2017 by about $2.2 million when
compared to FY2016. Receipts from customers have shown a robust increase in FY2017 but
these gains have been nullified by corresponding surge in payments to suppliers and
employees (RFG, 2017).
Cash Flow from Investing Activities – There is an increase in the outflow from investing
activities by about $ 70 million in FY2017 compared to previous year. This is on account of
higher outflow on purchase of PP&E. Also, there has been an outflow to the tune of $ 67
million in FY2017 owing to business acquisition (RFG, 2017).
Cash Flow from Financing Activities – In FY2017, there is a cash inflow of $ 31.9 million as
compared to outflow of $ 32.2 million in FY2016. The main reason for the same is the
proceeds from equity issue to the tune of $ 35.6 million (RFG, 2017).

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Question 2
Proposal 1
It focuses on improvements in quality by having $ 28 incremental variable cost per unit.
Besides, with advertisement spent increasing by $ 30,000, a 30% sales volume increase is
expected.
Quantitative Analysis
Proposal 1 Profits > Existing profits
However, it is imperative to consider the impact of lower sales increase than anticipated
through the use of sensitivity analysis as indicated.
Only with a 20% increase in sales, the profit shows some significant increase.
Assume X is the break even volume of sales required to generate the current profit of $
240,000.