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Financial Management Case Study Material – Pre-seen Case Study Answers

Final Case Study -Pre-seen Case Study

Looking for Financial Management Case Study Material – Pre-seen Case Study Answers? Get Case Study Answers on Financial Management Pre-seen Material). We Provide Financial Management Assignment AnswersManagement Case Study Assignment Writing & MBA Finance Assignment Help from Masters and PhD Expert at affordable price? Acquire HD Quality research work with 100% Plagiarism free content.

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Pre-seen Material Details:

Topic: Financial Management

Pages/Words: 1 Page/250 Words

 

Introduction

The Royal ltd is a publisher of a daily newspapers based in Gauteng, South Africa. It also provides web Media to the world wide audience. It has been listed on the Johannesburg stock exchange since 1994. The Royal has three distinct divisions, that is, the Newspapers, Advertising and the web divisions. The divisions are discussed below as follows:

The Newspaper division

This division has two printing sites and three offices. The royal publishes one Sunday Newspaper and three daily Newspapers in South Africa. The three offices edit the Sunday Newspaper and the three daily Newspapers. The Advertising division owns two subsidiary companies namely; Chronicle and HeraldChronicle and Herald are involved in publishing. Chronicle is based in Botswana within the SADC region and Herald is based in Ghana which is outside the SADC region. All printing for the division’s publications is done at the two printing sites, except for the publications produced by Chronicle and Herald. The two subsidiaries have their own printing sites.

The Web division

This division owns 200 websites which it maintains and develops. The development and maintenance of web material has become an important part of the business for “The Royal ltd”. During the past 10 years the division developed online versions of all the newspapers produced by the Newspaper division. Some websites are more popular than others. This is measured by the number of hits they receive

The Advertising Division

This division handles the sale of advertising space for the whole company (The Royal ltd). That is, the advertisements that appear in the print media and web pages produced by the Newspaper division and the web division are all handled by the Advertising division.

Headquarters of the Group

The Royal ltd has a head office that is based in Sandton. This is in addition to the three operating divisions that it has.  The board of directors sits at the head office in Sandton. The headquarters deal with the group’s corporate affairs.  The headquarters also administers and develops the group’s policies and procedures.

Mission statement

In 2015, The Royal established the following mission statement “To be the leading news media organization in Africa that provides quality reporting and information on African and World-wide news”.

The strategic objectives

In 2015 the board of directors established the following objectives:

  1. To provide reliable and well informed news that meets the needs of the readers
  2. To reach as many potential website and Newspapers as possible
  3. To increase advertising income so that the group moves  towards offering as many news titles as  possible free of charge to the public

Financial Objectives

  1. Revenue and operating income to grow by 4% per year
  2. To have a steady growth in dividends per share
  3. To maintain a gearing below 40%

Forecast revenue and operating profit

Year ended   31 December 2021

Forecast revenue                                                              R2 800 000 000

Forecast operating income                                              R 730 000 000

The figures were extracted from the forecast income statement for the year ended 31 December 2021

Divisional performance information

The following financial information is available for each division for the past three years:

The Newspaper Division Year ended Year ended Forecasted
31-12-19 31-12-20 31-12-21
External Revenue R910 000 000 R940 000 000 R940 000 000
Revenue from internal transfers R 900 000 000 R 910 000 000 R960 000 000
Net operating income R 450 000 000 R 460 000 000 R480 000 000
Fixed assets R4 200 000 000 R4 900 000 000 R 5 480 000 000
Current Assets R 40 000 000 R 80 000 000 (R10 000 000)
The Web Division Year ended Year ended Forecasted
31-12-19 31-12-20 31-12-21
Internal transfers R 550 000 000 R 600 000 000 R660 000 000
Net operating income R 100 000 000 R 130 000 000 R160 000 000
Fixed assets R370 000 000 R400 000 000 R 430 000 000
Current Assets R 10 000 000 R 10 000 000 (R20 000 000)
The Advertising Division Year ended Year ended Forecasted
31-12-19 31-12-20 31-12-21
External Revenue R162 000 000 R180 000 000 R186 000 000
Net operating income R 100 000 000 R 180 000 000 R190 000 000
Fixed assets R30 000 000 R60 000 000 R 70 000 000
Current Assets R 10 000 000 R 10 000 000 (R20 000 000)
Head office Year ended Year ended Forecasted
31-12-19 31-12-20 31-12-21
Net operating income R 80 000 000 R 90 000 000 R100 000 000
Fixed assets R370 000 000 R390 000 000 R 430 000 000
Current Assets R 10 000 000 R 10 000 000 (R10 000 000)

 

Notes:

  1. The advertising division remits advertising revenue to both the Newspapers and the Web divisions
  2. All of the web division’s revenue comes from advertising
  3. The newspaper division’s revenue and operating income include those earned by Herald and Chronicle. The forecasted revenue for the year ending 31 December 2021 for Chronicle is R200 000 000 and for Herald is R40 000 000

Additional information:

Newspapers Division

Chronicle is a wholly owned subsidiary. It was acquired in 2015. The financial statements of Chronicle are translated into South African Rands. These are consolidated into Royal ltd group financial statements. The financial statements are included in the newspaper division’s financial statements for the purposes of reporting.  A month after chronicle was acquired by Royal ltd, it launched a weekly newspaper called the pan-African. It is produced in Botswana and distributed throughout Africa. The board believed that the newspaper would become popular as it provided weekly African news. However, sales have been disappointing.

Herald publishes local newspapers in Ghana. It is also part of the Newspapers division. It is 80% owned by the Newspaper division. It was purchases in 2013. Herald is very profitable. It is produced at low cost.

The journalists used by the Newspaper division incur very high costs to carry out their duties. These costs have risen significantly during the previous years.

There has been significant capital investment in the Newspaper division since 2016. The division has modernised the printing press. This has improved the quality of the output and efficiency of the printing process. The customers have indicated that they are very satisfied with the product. The increased mechanisation and efficiency has reduced costs. It has also led to the reduction in the number of employees operating in the printing press. Consequently, some staff in the division has expressed dissatisfaction.  However, employees in other divisions have not been affected.

Web Division

The revenues from the web division are generated through advertising. This is revenue is generated from sales of advertising space in the web pages by the Advertising Division. Currently, there is no charge to access the newspapers.  The newspapers are shorter versions of the printed newspapers. The comments from the public about the websites have been very positive. The division is currently undertaking a review of all its costs, particularly the costs relating to employees, website development.

Advertising Division

This division pays advertising revenue to both the Newspaper division and the web division. The payment is done after the advertising division has deducted its commission from the advertising revenue. This division also offers advertising services to corporate clients. The advertising services include television and radio. The advertising division provides pop up advertising on websites.

Extracts from Royal ltd forecast group financial statements

Group forecast Income statement for the year ending 31 December 2021

Revenue                                                                                                 R 2 800 000 000

Operating costs                                                                                     R 2 070 000 000

Net operating profit                                                                              R    730 000 000

Interest income                                                                                      R   10 000 000

Interest expense                                                                                     (R110 000 000)

Taxation                                                                                                   (R 190 000000)

Forecasted profit                                                                                     R440 000 000

 

Forecasted Balance Sheet (Statement of financial position) as at 31 December 2021

Assets

Fixed Assets                                                                                              R6 410 000 000

Current Assets                                                                                        

Inventory                                                                                                   R 20 000 000

Debtors                                                                                                      R270 000 000

Cash and Cash equivalents                                                                    R20 000 000

Total Assets                                                                                              R 6 720 000 000

Liabilities

Long term liabilities                                                                               R2 500 000 000

Current liabilities

Payables                                                                                                    R460 000 000

Total liabilities                                                                                         R 6 720 000 000

Equity

Share capital                                                                                                               R1400 000 000

Share premium                                                                                                           R 350 000 000

Retained income                                                                                                        R 1 850 000 000

Non- controlling interest                                                                                           R 160 000 000

Total equity                                                                                                                  R 2 960 000 000

Notes:

  1. Assume taxation is 30%
  2. Shares issued are 140 million at R1 each
  3. The long term borrowing include R830 000 000 of loan capital which is due for repayment  on 1 January 2022 and the remainder is due for repayment on 1 January 2029

 

 

Reference ID: #getanswers2001266

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