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Question 1 Sonny Hasan is proposing to set up a wholesale business on the 1st July 2021. He has savings of 60,000 in cash in a bank account which will fund the enterprise. The premises where the business will operate will cost 1,400 a month paid on the first day of the month. Shop Fittings worth 10,000 will be purchased and to be paid in two equal instalments of 5,000 in the last day of August and September, respectively. From July, Sonny intends to withdraw 2,000 per month in respect of his salary. Initially, it will only be Sonny working in the business but later he intends to employ an assistant. The sales forecast is as follows: August September October November December 6000 7,500 12,000 27,000 80,000 Sales are on a month's credit; however, it is anticipated that 40% of the debtors will delay payment for one month beyond the due date. Forecast purchases are: July August September October November December 5,000 8,000 15,000 18,000 27,000 8,000 All purchases are paid in the month after the purchase. Expenses are 1,000 for July and thereafter 12% of monthly sales. Required: (a) Describe the purpose of budgets when starting up an enterprise as in the case of a small enterprise (5 marks) (b) Prepare a cash flow budget for the half-year commencing July to December 2021 (15 marks) (c) Discuss Sonny's business finances and any actions he needs to take (5 marks) (Total marks 25)

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