BBT Pte Ltd is a manufacturing company. The sales forecasts for the following quarters are provided below as at 31 December 2019.

Figures in $'million

Sales

2020

Q1 40

Q2 50

Q3 50

Q4 40

2021

Q1 50

BBT collects 60% of revenue in cash within the quarter and the remaining credit sales are collected in the next quarter. Purchases are 50% of the following quarter's sales. 50% of these purchases are settled by cash and the remaining credit purchases are settled in the next quarter. Overheads of $5 million per quarter are paid as incurred.

Outstanding trade receivables and trade payables as at 31 December 2019 are $10 million and $8 million respectively. These are expected to be fully collected or settled by the end of Q1 2020.

BBT expects to purchase new equipment in Q2 2020 for $20 million. Depreciation expense is $2 million per quarter. BBT will also commence paying quarterly dividends of $10 million beginning from Q3 2020.

Cash balance as of 1 January 2020 is $5 million.

(a)Prepare and construct a cash budget for Q1 to Q4 of 2020.

(16 marks)

(b)Mid-way through Q1 2020, a sudden global market event occurs which disrupts BBT's existing business. As a result, the sales team has revised their estimates and highlight that they will only be able to meet 25% of their initial sales forecasts for the rest of the year in 2020.

Assess and recommend three (3) options to improve the short-term liquidity situation for BBT.