Compile a cash budget for Blankets Limited for July to December 2026 and clearly indicate any financing costs.

Here's the cash budget for Blankets Limited for July to December 2026 and an overview of its cash flow situation.

Question 3a: Compile a cash budget for Blankets Limited for July to December 2026 and clearly indicate any financing costs.

Sales Data:

• March: R280 000
• April: R280 000
• May: R450 000
• June: R560 000
• July: R650 000
• August: R550 000
• September: R300 000
• October: R100 000
• November: R90 000
• December: R50 000

Credit Sales (50% of total sales):

• March: R140 000
• April: R140 000
• May: R225 000
• June: R280 000
• July: R325 000
• August: R275 000
• September: R150 000
• October: R50 000
• November: R45 000
• December: R25 000

Collection Pattern for Credit Sales:

• 1 month after sale: 20%
• 2 months after sale: 50%
• 3 months after sale: 30%

Cash Budget for Blankets Limited (July - December 2026)

Item	July	August	September	October	November	December
Beginning Cash Balance	R1 000 000	R460 500	R483 000	R534 500	R549 500	R467 000
Cash Receipts
Cash Sales (50% of current month)	R325 000	R275 000	R150 000	R50 000	R45 000	R25 000
Credit Collections:
1 month after (20%)	R56 000	R65 000	R55 000	R30 000	R10 000	R9 000
2 months after (50%)	R112 500	R140 000	R162 500	R137 500	R75 000	R25 000
3 months after (30%)	R42 000	R67 500	R84 000	R97 500	R82 500	R45 000
Total Cash Receipts	R535 500	R547 500	R451 500	R315 000	R212 500	R104 000
Total Cash Available	R1 535 500	R1 008 000	R934 500	R849 500	R762 000	R571 000
Cash Disbursements
Purchases & Other Exp (50% of sales)	R325 000	R275 000	R150 000	R50 000	R45 000	R25 000
Fixed Costs	R250 000	R250 000	R250 000	R250 000	R250 000	R250 000
Staff Bonus	R500 000	R0	R0	R0	R0	R0
New Equipment	R0	R0	R0	R0	R0	R1 000 000
Interest on Line of Credit	R0	R0	R0	R0	R0	R0
Total Cash Disbursements	R1 075 000	R525 000	R400 000	R300 000	R295 000	R1 275 000
Net Cash Flow	-R539 500	R22 500	R51 500	R15 000	-R82 500	-R1 171 000
Ending Cash Balance before Financing	R460 500	R483 000	R534 500	R549 500	R467 000	-R704 000
Financing
Borrowing (Repayment)	R0	R0	R0	R0	R0	R704 000
Ending Cash Balance	R460 500	R483 000	R534 500	R549 500	R467 000	R0
Cumulative Borrowing	R0	R0	R0	R0	R0	R704 000

Question 3b: Provide a brief overview of the company's cash flow situation over the period and provide your opinion on why it varies over the period.

The company begins the period with a strong cash balance. In July, a significant cash outflow occurs due to the R500 000 staff bonus, but the initial cash reserves are sufficient to absorb this, leaving a positive ending balance. Cash flow remains positive from August to October as cash receipts from sales outpace regular operating expenses. However, in November, a decline in sales leads to lower cash receipts, resulting in a negative net cash flow for the month, though the company still maintains a positive cash balance. The most critical period is December, where a substantial cash deficit of R704 000 arises. This is primarily driven by the large R1 000 000 payment for new equipment, compounded by very low sales and, consequently, low cash receipts. This deficit necessitates borrowing from the line of credit to maintain a zero ending cash balance. The cash flow varies significantly due to the timing of large, non-recurring disbursements (staff bonus in July, new equipment in December) and the fluctuating sales pattern, particularly the sharp decline in sales towards the end of the year.