Question
Budgeted sales revenue for the coming five months is as follows: Month Sales revenue August $110,000 September $145,000 October $160,000 November $155,000 December $130,000 You
Budgeted sales revenue for the coming five months is as follows:
Month | Sales revenue |
August | $110,000 |
September | $145,000 |
October | $160,000 |
November | $155,000 |
December | $130,000 |
You estimate that you will collect 45% of sales revenue in the month of sale, 35% in the following month, 15% two months after the sale, and the remaining 5% three months after the sale. Required: a) Compute budgeted cash inflows for November and December. November = $ December = $ (Hint: pay attention to the timing, e.g. "35% is collected in the following month" means 35% of August revenue is collected in September, i.e., cash receipts (inflows) for September include 35% of previous month's sales revenue.) b) Is it possible for a firm to run out of cash even though it is profitable? If no, explain why not, if yes, give an example of how that can happen
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