The firm expects its sales to increase by RM2 million on 2021. All the asset and current liabilities vary with sales. The interest expenses are remains at RM300,000 while depreciation expense will increase by RM500,000 in next year. The COGS for 2021 is reducing to 40% from its sales. The firm decides to pay the dividend to its shareholders 30% from its earnings in the next year.

The following information data pertain to Barrel Company.

2020 (RM in mil) Calculations 2021 (RM in mil) Sales COGS Gross profit Operating costs EBITDA Depreciation expense EBIT Interest expense EBT Taxes Net Income Dividends Addition to RE 25 (13) 12 (1) 11 (0.5) 10.5 (0.3) 10.2 (3) 7.2 (2) 5.2

2020 (RM mil) Calculation (RM mil) 2021 (RM mil) Sales Net income 2020 (RM mil) Calculation 2021 (RM mil) Cash AR Inventories TCA FA TA

Current liabilities Long term debt TL CS RE CE TL + TE 2 2 4 8 8 16

5 2 7 7 2 9 16

Required:

Construct the proforma for income statement and balance sheet. [You may answer in the provided sheet as above] (12 marks) (CLO2:PLO6:C4)

Propose either the firm should borrow from the bank. (3 marks) (CLO2:PLO6:C6)