Following information is available with respect to a firm.

Balance Sheet as on August 1

Assets Amount
Cash 5100
Accounts Receivable 14700
Inventory 26000
Net Fixed Assets (depreciation 4000) 16000
61800
Capital 59200
Accrued Wages 600
Other Liabilities 2000
61800

Assume:

1. Sales are 40% against cash and 60% on credit

2. Of the credit sales, 75% are collected in the first month following the sales and 25% in the
second month following the sales.
3. All inventory purchases are paid for during the month in which they are made
4. A Basic inventory of Rs. 10000 (cost) is constantly maintained and the firm follows a policy of
purchasing enough additional inventory each month to cover 1.25 times the following
month sales. Its gross margin is 20% on sales
5. A minimum cash balance of Rs.2000 is to be maintained by the firm
6. Accrued wages and other current liabilities remain unchanged.

June July Aug Sep Oct Nov Dec Jan Feb

Past 18000 20000
Sales
Sales 20000 26000 24000 40000 50000 18000 16000
Budget
Wages 1400 1600 1600 2000 3000 1400 -
and
salaries

Rent: 400 per month

Depreciation: 150 per month

Other expenses: 1% of the sales

Required: Indicate the maximum amount of necessary borrowings