Final Game - Edited
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RECTANGLE PHARMACEUTICALS LTD.
Act 330
Group Assignment 3
June 26TH, 2011
Prepared By
Zeeshan Rahman 0930194530
Mohiuddin Miraz 0930424530
A.K.M Sharfuddin Chowdhury 0930250530
Taslima Chowdhury Mumu 0710719030
Prepared For
RKB
Section 1
Lecturer
Department: School of Business
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1. Company Name
- Rectangle Pharmaceuticals Limited
2. Industry
-Pharmaceuticals Industry
3. Company Location
-Plant (Gazipur)
-Headquarter (Uttara Sector 3, House 22)
4. Products
The name Rectangle Pharmaceuticals assures you of many things: outstanding product quality,
leading-edge technology, advanced new products, and a commitment to serve the medical
community.
Our products come in a wide range of dosage forms including tablets, capsules, dry syrup,
powder for suspension, cream, ointment, suppositories, metered dose nasal sprays, large volume
intravenous fluids, metered dose inhalers etc. ensuring the global standard of quality.
5. Company Background
A) .No. of employees125 (Plant and Office)
B) .No. of departments and their functions in brief
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Research and Development:
The Research and Development department determines and identifies drug candidates. In R&D
department, there are three functional areas. They are discovery research, animal sciences and
bioinformatics.
Operations:
The Operations department produces a saleable amount of a drug. Once a drug has passed the
clinical trials, the manufacturing and production department manufacture the final product, along
with the packaging and labeling. Also housed under the operations umbrella is the environmental
health and safety function, which assesses the environmental impact of a potential product.
Quality:
There are various rules and safety regulations laid down by the FDA for pharmaceuticals and
biotech firms. If found guilty for drug contamination then the FDA may close the manufacturing
plant of the firm. The Quality department of the pharmaceutical firm also ensures that the firm is
adhering to government regulations. There are different groups which concentrate on functions
like assurance, quality control as well as validation. These groups ensure that the drugs
manufactured are accurate, and of a reliable standard of quality.
Finance and Administration:
The Finance and Administration department comprises different functional areas including
finance, administration, legal and information systems. Responsibilities include managing
activities related to finance management, handling legal relations with employees, investors,
creditors as well as government regulators.
Marketing
The marketing department recognizes potential fresh coalition partners and also handles previous
alliances. They are responsible for market research, recognizing potential customers and
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preparing the promotion and pricing strategy. They also handle the distribution of the finished
products.
Project Management:
Most of the pharmaceutical companies have a separate project management department. This
department is responsible for coordinating the functions of all departments and also ensures
smooth and efficient functioning. The Project management department also monitors particular
projects.
6. Company Financial Policy:
The company will BAS , and IAS in recording the day to day transactions and financial
statements
The company will follow straight line depreciation methods to depreciate its assets and
has no salvage value.
The company will make appropriate investments (machinery and large scale production)
that maximize future cash flows and facilitate efficient operations.
The CEO and CFO is responsible for taking decision about taking loan from the bank
The CEO , CFO and the Financial executive can take decisions for further
investments(leasing and purchase of assets) and the all cheques must be signed by the
CEO , CFO and Financial executive
The CFO and Financial executive will develop the budget of the company and the CEO
will approve. But at first the budget must be checked by the auditor
Some common reserve funds are 'rainy day', sinking funds , legal liability, research and
development, equipment and software acquisition, building maintenance or acquisition(In
the coming future )
At the end of every year a financial audit procedure must be performed
Financial Statement will be prepared at the end of each financial year
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Accounts Receivables Policy
The following is the practice used to collect general accounts receivable:
1. CURRENT ACCOUNTS: At the end of each month statements are mailed to each owner with
an outstanding balance.
2. 30 DAYS PAST DUE: If the account is not paid in full in 30 days a collection letter requiring
payment in full is sent to the owner along with a new statement of account.
3. 60 DAYS PAST DUE: If the account is not paid in full in 60 days, a final collection letterstating that they will be turned over to our attorney for legal proceedings is sent with a copy of
the current statement of account.
4. 90 DAYS PAST DUE: If the account is not paid in 90 days the administrative staff attempts to
contact the member by telephone. At that point a decision is made as to whether the account
should be turned over to the attorney for collection proceedings and whether or not a lien should
be filed against the member.
Bad Debt Policy
Authority to Write-off
The Board of Directors has sole authority to write off uncollectible debts unless the amount is
more than BDT100, 000.
Written off amounts of more than BDT100,00 will be referred to AGM for approval.
Considered factors for write-off debts
1. Debt has been inactive for 6 or more years and all avenues have been exhausted by
management to collect the outstanding debt.
2. Debtor has passed away.
3. The corporation has shut down.
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Top Level Management
CEO (Mohiuddin Miraz)
CFO(Zeeshan Rahman)
Financial Executive(Taslima Chowdhury)
Director(AKM Sharfuddin)
Middle Level Management
Operation Manager
HR Manager
FinanceManager
Marketing Manager
Distribution Manager
Front Line (Supervisory Level) Management
Factory Manager
Sr. Factory Supervisor
Other Production Departmental Supervisors
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Bond Adjustments
Account Name Debit(BDT) Credit(BDT)
1. April 1 , 2005
Cash
(2400 interest + Book value of bond
=102,335
104,735
Discount on bonds payable 17665
Bonds payable 120,000
Bonds interest expense (120,000 x 8 %= 9600 ; 9600/2= 4800 Tk semi annually so for 3 months, 4800/6 x 3 =
2400Tk
2,400
2. June 30 , 2005
Bonds interest expense (carrying value of April 1 ,
2005 = 104,735 x 12% / 2)
6140
Bonds interest payable 4,800
Discount on bonds payable 1,340
3. July 12005
Bonds interest payable 4800
Cash
(interest on bonds paid on July 1 )
4800
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Schedule of Bonds discount amortization
Effective interest rate method
5 years , 8% bonds sold to yield 12
%
Date cash paid Int exp Discount
amortization
carrying value of
bonds(BDT )
1/4/2005 102,335
1/7/2005 4800 6140.1 1340.1 103,675.1
1/1/2006 4800 6220.50 1420.50 105095.60
1/7/2006 4800 6305.74 1505.74 106601.35
1/1/2007 4800 6396.08 1596.08 108197.43
1/7/2007 4800 6491.85 1691.85 109889.281/1/2008 4800 6593.36 1793.36 111682.64
1/7/2008 4800 6700.96 1901 113583.64
1/1/2009 4800 6815.02 2015.02 115598.66
1/7/2009 4800 6936 2136 117734.66
1/1/2010 4800 7064.08 2265.34 120000
Leasing: Capital Leasing Method
Account Name Debit(BDT) Credit(BDT)
Oct 1 , 2005
Leased Asset(Office Floor) 300,000
Lease Liability 300,000
Lease Payment 45,000
Executory Cost 5,000
Cash 50,000
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Rectangle Pharmaceutical LTD has taken a office floor lease for 5 year period and the terms
and provisions of the lease agreement, and other pertinent data, are as follows. The term of the lease is five years and the lease payment rate is 12% per year. The
lease agreement is non-cancelable, requiring equal rental payments of BDT 50,000
at the middle of each year (annuity due basis). The office floor has a fair value at the inception of the lease of BDT300,000 Rectangle Pharma. pays all of the executary cost of BDT5,000
. Lease Amortizing Schedule:
The term of the lease is five years. The lease agreement is noncancelable,
requiring equal rental payments of $ 50000 at the beginning of each year
(annuity due).
Fair value of the lease is $300000
Estimated economic life of five years, and no residual value. The executor cost is $ 5000 per year.
The lease contains no renewal options.
The interest rate is 12%.
Lease Amortization Schedule(Annuity- Due Basis)
Date AnnualLease
Payments
Executorycost
Interest(12%) on
liability
Reductionof lease
liability
LeaseLiability
1/1/05 - - - - $181680.75
1/1/05 50000 5000 -0- $ 45000 136680.75
1/1/06 50000 5000 16401.69 28598.31 108082.44
1/1/07 50000 5000 12969.89 32030.11 76052.33
1/1/08 50000 5000 9126.27 35873.73 40178.6
1/1/09 50000 5000 4821.432 40178.6 -0-
250000 25000 43319.28 181680.75
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Depreciation: (Straight Line Method)
Fixed Asset Worth Depreciation
Expense for
(2005)
Net Book
Value for
(2005)
Depreciation
Expense for
(2006)
Net Book
Value for
(2006)
Plant
Premises
3,000,000 300,000 2,700,000 300,000 2,400,000
Machinery 3,000,000 300,000 2,700,000 300,000 2,400,000
Fixture and
Fittings
500,000 50,000 450,000 50,000 400,000
Motor Vehicle 2,000,000 200,000 1,800,000 200,000 1,600,000
Computer
System
200,000 20,000 180,000 20,000 160,000
Rectangle Pharmaceutical LTD. depreciation policy are as follows:
The company uses straight line method to depreciate their assets.
The companys all fixed assets estimated useful life is 10years.
They dont have any estimated salvage value for their fixed assets.
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Income Statement For the year ended 2005 and 2006
Details: Year-2005 Year- 2006
Sales 1,439,850 2,159,775
Less: COGS 941,180 969,415
Gross Profit 498,670 1,190,360
Operating Expenses:
Salaries 900,000 1,000,000
Utilities 400,000 350,000
Telephone charges 130,000 100,000
Advertising 400,000 500,000
Lease Payment 45,000 45,000
Executory Cost 5000 5000
Insurance Expense 100,000 100,000
Depreciation 870,000 870,000
Sales & Marketing 150,000 100,000
R & D 150,000 200,000
Finance Dept 50,000 100,000
Total Operating
Expense
3,200,000 3,270,000
EBIT (2,701330) (2,079,640)
Bond Interest expense (6140) (12,526)
Taxation -
Net Income (2,707,470) (2,092,166)
***Loss Decreased by BDT 615304 in the year 2006
***Expecting to reach break even in the 4th year of operation
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Balance Sheet as at 2005 and 2006
Asset 2005 2006Current Assets:
Inventory 58,640 89,225
Accounts Receivable 300,000 500,000
Cash in Hand 1,473,890 1,082,139
Prepaid Insurance 100,000 0
Total Current Asset 1,917,885 1,671,364
Fixed Assets:
Machinery 3,000,000 2,700,000
Plant Premises 3,000,000 2,700,000
Motor Vehicles 2,000,000 1,800,000
Leased Asset 300,000 250,000Fixtures and Furniture 500,000 450,000
Computer 200,000 180,000
Total Fixed Assets 9,000,000 8,080,000
Less: Accumulated Depreciation (870,000) (870,000)
Net Fixed Assets 8,130,000 7,210,000
Total Assets 10,062,530 8,881,364
Current Liability:
Accounts Payable 700,000 1,100,000Total Current Liabilities 700,000 1,100,000
Long Term Liability
Bond Payable 120,000 120,000
Lease Liability 300,000 250,000
Total Liabilities 1,120,000 1,470,000
Owner's Equity
Share Capital(50000 Issued) 1,500,000 2,010,000
Capital 10,000,000 10,000,000
Premium on Shares 150,000 201,000Retained Earnings
Net Loss (2,707,470) (2,092,166)
Last years loss(2,707,470)
Total Owner's Equity and liabilities 10,062,530 8,881,364
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Statement of Cash Flow for the yearended 2005 and 2006
2005 2006
Cash Flow from operating activities
Net Income (2,707,470) (2,142,166)
Adjustment to reconcile net income to net cash provided
by operating activities:
(+)Depreciation Expense 870,000 920,000
Account Receivable (300,000) (200,000)
Inventories (58,640) (10,00,000)
Prepaid Insurance (100,000) 100,000
Accounts Payable 700,000 (100,000)
Net cash used by operating activities (1,596,110) (2,422,166)
Cash flow from Investing Activities
Purchase of Machinery (3,000,000) -
Purchase of Plant Premises (3,000,000) -
Purchase of Fixture (500,000)
Purchase of Motor Vehicle (2,000,000)
Purchase of Computer (200,000)
Net Cash used by investing activities (8,700,000)
Cash flow from Financing Activities:
Common Stock 1,650,000 561,000
Bond Issued 120,000 -
Capital 10,000,000 -
Net Cash Provided by Financing Activities 11,770,000
Net Increase in Cash in 2005 1,473,890
Net Decrease in Cash in 2006 (1,861,166)