Part A
a. 3
b. 1
c. 3
d. 3
e. 1
f. 4
g. 4
h. 1

Part B
Memorandum
To: The owners, Synamex Effects Limited
From: CGA, Controller, Synamex Effects Limited
Date: March 16, 2015
Re: Current risks and issues of Synamex Effects Limited

As per your request, I have presented my thoughts and suggestions on the current risks and issues of SEL, the three accounting packages, and the key steps required for initial public offering (IPO).

Current risks and issues of SEL

Foreign exchange risk

The sales in the U.S. market segment have been growing and accounted for 25% of total revenue. In addition, the recent contract with the Los Angeles studio is chosen to purchase some of the materials in California, which has exposed SEL to foreign exchange risk. This risk could be eliminated by using natural hedging with purchases from U.S. suppliers. It could be mitigated by using hedging strategies, such as swaps, forwards and options.

Financial management issue

As owners, I understand the importancy of developing new ideas and testing prototypes, which are considered to be part of SEL’s competitive advange. However, it is also crucial to focus on financial management and to engage on long-term strategies to emphasize on the going-concern.

Contract pricing issue

The three contracts accepted earlier this year suggest the current pricing scheme does not provide sufficient revenue to cover the relevent expenses. Project cost management is critical to serve as a basis to measure cost and productivity of each project. Therefore, the IT systems should implement a project costing function to support more appreciate pricing decisions.

Cash-flow management issue

Recent delays in vendor payments have been a cash-flow management issue. Cash flow shortages and frequent late payments could cause operating difficulties and affect our reputation negatively.