2: Cash inflows from sales Budgeted sales are: Month August Sales revenue $13,000- September $13,000 PRACTICE ANOTI October $15,000 November December $10,000 $20,000 You collect 50% of sales revenue as cash in the month of the sale, 40% in the following month, and 10% two months after the sale. a) Compute budgeted cash inflows for October and November: October $ November s Remember to go backwards in time: e.g. 40% of September revenue is collected in the following month (October). This implies that cash inflows for October include 40% of sales from the previous month (September). b) According to the income statement, a firm is profitable in the current year. Can the firm run out of cash during the year? O YES NO What are some examples of how a film could run out of cash? (select all that apply) Rapid sales growth: A firm incurs many cash outflows in advance to generate sales (eg, salaries, payments to suppliers), and it collects cash inflows from saws with a delay due to credit sales. To generate higher sales, the firm needs to increase cash outflows today but the comesponding cath infions will rease with adlaxafa fen months The firm can run out of cash during this delay Remember to go backwards in time: e.g. 40% of September revenue is collected in the following month (October). This implies that cash inflows for October incode 40% of sales from the previous month (September). b) According to the income statement, a firm is profitable in the current year. Can the firm num out of cash during the year? OVES ONO What are some examples of how a firm could run out of cash? (select all that apply) Rapid sales growth: A firm incurs many cash outflows in advance to generate sales (eg, salaries, payments to suppliers), and it collects cash inflows from sales with a delay due to credit sales. To generate higher sales, the firm needs to increase cash outflows today, but the corresponding cash inflows will increase with a delay.uta.few months. The fem ca run out of cash during this delay. O Purchase of new equipment: If a firm buys major new equipment for cash, then it has a large cash outflow in the current year current year's income statement does not reflect th cash outflow (Instead, this cash outflow will become annual depreciation expense in future income statem the antire useful We of the equipment Trick question: by definition, a profitable firm must have higher cash inflows than cashows c) A firm is about to run out of cash. What can it do to mitigate the cash shortage? (select) buy new equipment encourage customers to pay their bio early leg offer a discount for early payment) repay bank foans early to reduce debt postpone payments to suppers borrow money encourage customers to pay it casts (eg, offer a discount for cash payment Costponement purchases