Q3. Fill in the blanks of Table 1: Monthly Cash Outflows and Table 2: Monthly CashInflows. Then, use the information to generate Table3: Pro-Forma Cash Flow Budget and answer the following questions. (10 points in total)

Table 1: AgBiz Estimated Monthly Cash Outflows (Jan. Apr.)

Item Jan Feb Mar Apr

Sales $27,000$20,000 $10,000

Purchases($) $6,500 $10,000$25,000

Payment of Account Payable$17,000

Payment of Overhead $3,000$3,000$3,000$3,000

Total Cash Outflows

Inventory Levels $12,000 $11,500 $35,000

Assumptions:

1. The inventory turnover rate is 6.

2. Inventory is equal to current month's purchases + previous month's purchases

3. Cost of goods sold=50% of sales

4. Account payable turnover ratio=12

Table 2: AgBiz Estimated Cash Inflows (Jan. - Apr. )

Item Jan Feb Mar Apr

Sales $27,000 $20,000 $10,000

Cash Sales ($) $5,500

Account Receivable

(2 month old) $3,000 $2,000

Account Receivable

(3 month old) $3,000 $3,000 $2,000

Total Cash Inflows

Assumptions:

1. Sales are one half cash, and one half credit.

2. Account Receivable ratio is 4.8.

Table 3: Pro-Forma Cash Flow Budget

Item Jan Feb Mar Apr

Initial Cash Balance$1,000$1000$1000$1000

Cash Inflow

Total cash available

Cash Outflow

Net Cash

Need Borrowings

End Cash Balance$1,000$1,000$1,000$4,000

Cumulative borrowings

(Hint: These three tables are consistent. You are able to get cash inflow from table 2 and cash outflow from table 3)

Based on the above Pro-Forma Cash Flow Budget, answer the following two questions:

(1) Does the business need to borrow money? If yes, how much money needs to be borrowed?

(2) When does the money need to be borrowed? When will the loan be repaid?