The following information relates to forecasts of activity for TLM plc:

Notes

1. Half of sales are on credit and customers are allowed one month in which to pay.
2. Wages are paid as they fall due. Suppliers of materials grant one months credit and suppliers of expenses allow two months credit.
3. From the capital budget it is known that a payment of 4,000,000 for new machinery is due to be made in September 2020.
4. The proceeds of an issue of new shares, amounting to 3,000,000, will be received in November 2020.
5. The expected cash balance at 1 July 2020 is 500,000.
6. TLM plc currently does not have a bank overdraft facility.

Required:

1. Prepare a cash budget for the six months from 1 July to 31 December 2020 by month.

2. Discuss the liquidity issues facing TLM based on the cash budget you prepared in (i) above, and make appropriate recommendations to its management.

2020- Sales Materials - Wages Expenses 000s 000s 000s 000s May 3,000 1,500 400 3002 A June 3,000 1,5004 400 300 1,7004 5002 350 July 3,400 August 3,400 September 3,600 1,7004 5002 350 1,9004 600 400 October 3,600 2,000 600 3502 November 3,400 1,900 500 350 December 3,2004 1,8004 450 300