Purchasing and Financing 2024

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Contents CATS Program .......................................................................... 1 Commercial Advancement Training Scheme ............................ 1 PART A. PURCHASING MANAGEMENT ........................................ 3 1. THE IMPORTANCE OF THE PURCHASING DEPARTMENT ...... 3 2. THE LEVERAGE EFFECT OF PURCHASING .............................. 3 3. SELECTING THE BEST SUPPLIER ............................................. 4 4. PURCHASING COSTS .............................................................. 7 5. STOCK CLASSIFICATION BASED ON TURNOVER .................... 9 6. JUST IN TIME PURCHASING ................................................. 11 7. ORDERING SYSTEMS ............................................................ 13 8. STOCK INDICATORS .............................................................. 17 9. MINIMISING INVENTORY COSTS ......................................... 18 10. MAKE OR BUY DECISIONS ................................................. 20 11. THE PURCHASING ROUTINE ............................................. 22 12. FORMATIVE ASSESSMENT ................................................ 23 PART B. FINANCIAL MANAGEMENT .......................................... 26 1. THE IMPORTANCE OF FINANCIAL MANAGEMENT .............. 26 2. FINANCIAL TERMINOLOGY .................................................. 26 3. THE CASH CYCLE ................................................................... 28 4. CAPITAL REQUIREMENT PLANNING .................................... 30 5. SOURCES OF FINANCE ......................................................... 32 6. CREDITWORTHINESS ............................................................ 35 7. LOAN REPAYMENT ............................................................... 36 8. FINANCING RULES ................................................................ 38 9. CREDIT SECURITIES .............................................................. 39 10. FINANCIAL RATIOS ............................................................ 42 11. FUTURE AND PRESENT VALUE .......................................... 51 12. FORMATIVE ASSESSMENT ................................................ 53 2
PART A. PURCHASING MANAGEMENT 1. THE IMPORTANCE OF THE PURCHASING DEPARTMENT Students must be able to describe the objectives of the purchasing department. A purchasing decision starts with the recognition of a need. Once a need is recognised it must be accurately described so that the correct item can be bought the first time. It’s a waist of money to buy unneeded items or to buy the wrong item, because it was badly described. Supplies must be well managed by the purchasing department so that, when needed, supplies of the right quality are readily available in the right quantity. The four key performance indicators are: o Quality (Supplies must be good enough to be used for their purpose) o Quantity (Enough of an item must be available) o Availability (Supplies must be available when needed) o Accessibility (It must be easy to take delivery of the supplies) If the key performance indicators are in place, then the user departments will be happy with the purchasing department, but cost will always be of concern for senior management and so the Purchasing Manager will always have to keep an eye on cost, whiles not compromising on the four key performance indicators. 2. THE LEVERAGE EFFECT OF PURCHASING Students must be able to illustrate the leverage effect of purchasing by calculating the increase in profit percentage caused by a reduction in the purchase price of the article. EXAMPLE: An item is bought for R1 500-00 and sold for R2 000-00 rand while the operating cost amounts to R300-00. What will the effect be on the % increase in Net Profit if the Purchasing manager can? o A: Reduce the purchasing costs by 2.5 % o B: Reduce the purchasing costs by 5 % o C: Reduce the purchasing costs by 10 % Remember that: Gross Profit = Sales Income – Cost of Sales Net Profit = Gross Profit – Operating Cost 3
Page 1: CATS Program Commercial Advancement
Page 5 and 6: Quality Regarding quality, you must
Page 7 and 8: Price Before one can measure the su
Page 9 and 10: 5. STOCK CLASSIFICATION BASED ON TU
Page 11 and 12: CLASS ASSIGNMENT: A handcraft shop
Page 13 and 14: 7. ORDERING SYSTEMS After it was de
Page 15 and 16: Quantity A) Fixed Quantities Orderi
Page 17 and 18: Deciding which system to choose wil
Page 19 and 20: There are three ways to find the op
Page 21 and 22: Cost (R) The decision whether to ma
Page 23 and 24: STEP 13: STEP 14: STEP 15: STEP 16:
Page 25 and 26: Question 6 Study the graph below on
Page 27 and 28: Current assets are assets with amou
Page 29 and 30: It is important to note that Income
Page 31 and 32: INDIVIDUAL ASSIGNMENT: A small comp
Page 33 and 34: We can distinguish between the foll
Page 35 and 36: 6. CREDITWORTHINESS Students unders
Page 37 and 38: The following should be clear from
Page 39 and 40: 9. CREDIT SECURITIES Students can d
Page 41 and 42: 5. Lien A lien is the right to hold
Page 43 and 44: When evaluating the Growth of a Bus
Page 45 and 46: Investors are either expecting an i
Page 47 and 48: 1. Average Assets for Period = (Beg
Page 49 and 50: ROE = Net Income/Average Stockholde
Page 51 and 52: XYZ LIMITED GROUP INCOME STATEMENT
Page 53 and 54:
INDIVIDUAL ASSIGNMENT: You intend t
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