Question 2 (25 marks)

Ronaldo and his brother have recently taken up a franchise business. A bank overdraft limit of RM40,000 is available. The following are the forecast figures for the next six months:

	Purchases	Sales	Salaries	Wages and Overhead
	RM000	RM000	RM000	RM000
November 2018	50	100	10	25
December 2018	60	120	30	35
January 2019	40	100	40	45
February 2019	50	70	35	45
March 2019	60	80	10	20
April 2019	60	120	25	20

(1) A franchise payment of RM5,000 per month is required.

(2) 50% of the total sales are cash sales, 25% is received one month later and 25% two months later.

(3) Purchases are paid one month later.

(4) Salaries are paid in the month they are incurred.

(5) Overheads including RM5000 depreciation and paid one month later.

(6) Rent of RM2,000 per month is paid three months in advance, in December, March, June and September of the following year.

(7) Capital expenditure payments will be:

February RM8,500 March RM2,250 April RM5,000

(8) A cash balance of RM8000 is forecast at 1 January 2019.

Required:

(a) Prepare the cash budget for the three months January, February and March 2019. (20 marks)

(b) Briefly comment on the business performance. (5 marks)