Question

Schools across Ghana have been closed down. This is to curb the spread of the fast-spreading coronavirus (COVID- 19). The news portal, the Ghanaweb reported this on the 16th March 2020. Since then, school fees and feeding fee collection from parents has come to a standstill. “Yet the payment of bills such as salaries, rent, electricity bill, water bill has not come to a standstill” lamented Mr. Amuzu, the headmaster of Twinkle Tots International school in a telephone conversation with Mr. Berko- the school’s accountant. Mr. Berko decided to offer some advice to Mr. Amuzu on how the school could settle its outstanding bills due in the next six months. This way, the school could continue to stay afloat. What advice do you think Mr. Berko offered to Mr. Amuzu on settling the school's bills? Discuss comprehensively.

start by explain corona virus and how it has caused the pandemic and everything use be strategy of Business finance

Answer 1

Corona Virus was originated in China in the state of Wuhan in December 2019. There are multiple theories about how the virus was originated still there is no conclusion on the same. Since then it has spread across the globe and seems to be unstoppable.

Strategy to manage the expenses in absence of inflows:

1. Rent- Mostly all the rent agreement has a force majeure clause. Which means in the event due to circumstances outside the hand of an individual, the rented area could not be used for a specified period, the clause can be invoked and rental payment could be stopped for that period.

2. Electricity/ Water bill- As the school is not used at present, electricity being a variable cost, the cost will come down drastically subject to fixed monthly charges. Hence, to that extent the same needs to be managed

3. Salaries- There is actually no decrease to the same as the salaries still needs to be paid. The appraisals can be deferred and to that extent the school can have some buffer cashflow. If the teachers are co-operative, then a strategy of deferral payment can be adopted, where at present certain percentage is being paid and rest will be paid once the school reopens.