Setia Sdn Bhd had cash of RM13,000 on hand together with trade debtors' outstanding balance of RM55,000 as of January 1. During the year, the company expected the following sales to customers by quarter, with collection terms of 50% in cash and 50% in credit receivable in the next quarter:

	first	second	third	fourth
Sales	110,000	245,000	122,400	149,600

Direct materials purchases in metric tons (MT) costing RM 50.00 per MT payable in the the same quarter is as follows:

	first	second	third	fourth
Direct Material Purchases	1,300	1,500	1,100	1,000

The production budget showed the following unit production by quarter with an average labor wage rate of RM40.00 payable in the same quarter:

	first	second	third	fourth
unit to be produced	1,500	2,000	1,700	1,500

Setia Sdn Bhd planned to pay dividends of RM10,000 per quarter during the year. In July, new equipment costing RM60,000 will be purchased. An additional cost of RM16,000 was planned for its installation during the fourth quarter. The company was required to maintain a minimum cash balance of RM15,000. A line of credit was available for short-term borrowings in increments of RM1,000. All borrowings will be made at the beginning of a quarter and repaid at the end of the quarter. Interest on the short-term borrowings will be paid at 0.5% per quarter on the amount repaid in any quarter when a loan repayment is made. All other interest expense will be accrued each quarter.

(a) Prepare a cash budget for Setia Sdn Bhd by quarter and for the year in total.

(b)Cash budget plays a critical role in a business particularly during a financial crisis period with a slow-down in the economic activities. Advise Setia Sdn Bhd what liquidity problems in a business are, how a cash budget preparation is able to solve these problems, and the challenges in working out a reliable and realistic cash budget. Give at least five ways that cash budget preparation is able to solve this problems.