Thomas Ltd is a hat shop business which is planning to open a new branch soon that will be cash intensive, and management wants to know the estimated cashflow in the next six months. Operations and Finance have provided the following information:

• Available cash at the end of December 2021 was 12,000.
• Sales in the month of December 2021 were 30,000.
• 60% of sales are collected in cash immediately and the remaining 40% are collected one month after the month of sale.
• 60% of purchases are paid in cash immediately and the remaining 40% are paid for two months after the month of purchase.
• November purchases were 18,200.
• Microguide Ltd pays salaries of 7000 every month.
• The monthly rent paid by the company is 1500.
• Monthly utilities bills amount to 150.
• The depreciation charge for Microguide Ltds non-current assets is 200 monthly.
• Microguide Ltd plans to take a loan on 1 February 2022 with a monthly interest charge of 500

Sales and purchases have been forecast as follows:

	Dec	Jan	Feb	Mar	April	May	Jun
Sales (Units)		600	625	650	715	770	830
Price per unit		60	60	60	60	60	60
Purchases	19,000	20,000	22,000	24,000	28,000	32,000	35,000

Required:

• Prepare a month-by-month cash flow forecast from January 2020 to June 2020. All relevant workings must be shown (41 marks)
• Based on this cash flow forecast, comment on whether you consider this business to be sustainable, and explain why? (2 marks)