Pegaga Berhad forecasted its sales will reach RM900,000 next year. As the financial manager of the company, Mr. Zaki is trying to determine short term cash needs to support an increase in sales. The following are financial statements for year ended 2019.

PEGAGA BERHAD

Statement of Financial Position for the year ended 2019

Assets

(RM)

Liabilities

(RM)

Cash

Marketable securities

Inventory

Next fixed assets

35,000

25,000

76,000

150,000

Account payable

Notes payable

Bond mortgages

Paid in capital

Common stocks

Retained earnings

15,000

20,000

100,000

31,000

75,000

45,000

Total assets

286,000

Total liabilities and equity

286,000

PEGAGA BERHAD

Statement of Financial Performance for the year ended 2019

RM

Sales

Cost of goods sold

Earnings before interest and tax

Tax (30%)

Earnings after tax

Dividends

Retained earnings

400,000

(255,000)

145,000

(43,500)

101,500

50,750

50,750

It is estimated that the company will try to maintain the net profit margin and dividend payout ratio as in 2019 for 2020. Assuming all the assets will increase according to the sales:

(a)Determine the additional financing as it absorbed by notes payable.

(b)Explains the advantages if the company decides to use short term financing as its external source.