Francesca Diva is planning to start a shoe shop called Dudes & Divas Ltd on 1 July 2012 with £25,000 she has inherited. She is going to be a sole proprietor and plans to open a small shop in the town centre. She has found suitable premises and has arranged for professional shop fitters to refurbish them. The new fixtures and fittings will cost £30,000, but will not have to be paid for until September. In addition, she estimates the following transactions will take place during the first 3 months of trading:

Required

(a) Prepare a cash flow forecast for Dudes & Divas Ltd for the 3 months 1 July to 30 September 2012.

(b) Interpret the cash flow forecast you have prepared and comment on the cumulative cash position at 30 September 2012.

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Revenue (cash sales) Revenue (credit sales) Purchases Overheads Salaries 10,000 per month 2,000 per month (customers will have one month's credit) 5,000 per month (suppliers will give 2 months' credit) 5,000 per month 1,500 per month