Page 27 - CIMA MCS Workbook November 2018 - Day 1 Suggested Solutions

SUGGESTED SOLUTIONS

Within operating activities, there was a cash outflow resulting from increases in both inventories
(Z$6.2m) and trade trade receivables (Z$20.4m). This cash outflow was offset to some extent by
an increase in trade payables of Z$15.3m. Movements in working capital have been considered
earlier within this analysis.

The only item within investing activities is a cash outflow of Z$7.0m for payment of PPE,
representing 10.8% of the carrying amount of PPE at 30 June 2018.

Within financing activities, there was a small net cash inflow of Z$1.2m, comprising receipt of a
loan of Z$6.4, less payment of a dividend of Z$5.2m. It is noted that the receipt of the loan has,
arguably, been used as the source of cash to make the dividend payment.

Sales analysis

The geographical sales analysis information confirms that all sales are made within Zedland. The
three regions have sales analysed into four sectors: supermarkets, other retail, restaurants and
bars and airlines. There is no analysis or comparison with the market as a whole for this
information to indicate e.g. what share of the carbonated soft drinks market in Zedland does
Grapple have?

Supermarkets are by far the largest customer base for carbonated drinks, still soft drinks and fruit
juices in all three regions. It is likely that the margins earned on such sales will be subject to
significant commercial pressures to make them acceptable to supermarkets and their customers.

Grapple appears to have a well established customer base in all three regions from restaurants
and bars, with carbonated soft drinks accounting for between 25% ‐ 34% of total sales of
carbonated soft drinks total sales in all three regions. Similarly, sales of still soft drinks and mixers
to restaurants account for between 16% ‐ 26% of total sales of those drinks in each region. It is
only in sales of fruit juices where the percentage of total sales in each region is at its lowest,
between 7% ‐ 13%.

In all regions for all types of drinks, sales to airlines comprise less than 10% of each product type.

Competitor analysis

Based upon revenue generated, Party Pops and Carnival are by far the two biggest players in
Zedland. Tiger Fizz is slightly smaller than Grapple, and Bluejay is the smallest with annual
revenue of Z$23m.

Grapple is the only entity which demonstrated significant revenue growth (61%) based upon the
information available. This could be due to its focus upon quality. TigerFizz suffered a fall in
revenue of 12%, whilst revenue growth for Party Pops, Carnival and Bluejay was negligible.

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