Use the following information to answer question 3.1 to 3.3:

Blakecon Ltd, a construction firm, is busy with planning for January 2018 and the coming financial year which runs from the start of February 2018 to end of January 2019 (its 2019 financial year). The film experienced shortages of funds over the past financial year and due to construction industry closures over December, the firm needs to also plan for the month of January 2018 as experience has shown that shortfalls are the most common in this month.

Relevant figures are given below:

2018 Sales (Expected for the full 2018 financial year)	R4 000 000
Net Profit margin	2%
Retention ratio	100%
Total spontaneous assets	R 1 000 0000
Total spontaneous liabilities	R6 000 000
Expected 2019 financial vear sales	R6 000 000

In January 2018, the firm expects sales of R600 000 with payments related to the costs of sates amounting to R400 000 and operating costs of R250 000. Due to closures in December 2017, some work still has to be completed in January 2018; and 50% of purchases made in December have to be paid in January. The firm had a negative cash balance at the end of December 2017 to the amount of (R100 000) or -R100 000.

The firm is operating with its assets at full-capacity and does not expect to increase its non-spontaneous assets. It has access to a short-term credit facility where it can borrow up to a maximum of R1 000 000 at 7% variable interest per annum; and a long-term loan of up to R2 000 000 at 8% fixed per annum.

Question 3.1........................................................................................................................... 6 Marks

How much financing will the company need for the coming year (the 2019 financial year)? (The additional funds needed/sales percentage formula can be used). (6)

Question 3.2............................................................................................................................ 4 Marks

How much financing (or excess cash) would the firm require (or have) for only January 2018?

Question 3.3..............................................................................................................................8 Marks

Evaluate whether the firm should use an aggressive (as much short-term financing as possible) financing strategy versus a conservative (as much long-term financing as possible) financing strategy for the funds required, for the coming financial year and January. Refer to the financing costs and other issues, such as risk.