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    Complete a cash forecast covering three months

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    Complete a cash forecast covering three months of business using the included data.

    A firm has actual sales of $65,000 in April and $60,000 in May. It expects sales of $70,000 in June, $100,000 in July, and $100,000 in August. One quarter (25%) of these sales are cash.
    Of the credit sales, 70% are collected one month after the sale. The remaining 30% are collected two months after the sale. Each month the firm purchases inventory equal to 75% of the expected sales and pays for the purchases the following month. Salaries and commissions equal 20% of sales and other cash outflows total $10,000 per month. The cash balance as of May 31 was $5,000. The firm wishes to maintain a $5,000 minimum balance.
    Develop the cash budget for the months of June, July, and August.

    Sales April May June July August
    Cash 16,250
    Credit 48,750
    Total 65,000 60,000 70,000 100,000 100,000

    Collections
    Cash sales
    Credit sales
    1 Mo. Prior (70%)
    2 Mo. Prior (30%)
    Total Collections

    Cash Budget
    Beginning Cash 5,000 5,000 5,000
    Collections
    Total Cash Available

    Distributions
    Purchases
    Salaries
    Other
    Total Distributions

    Minimum Cash Balance 5,000 5,000 5,000
    Excess (Deficit)
    Cumulative Borrowing

    As a financial manager, why is this cash forecast important to you? What problems would an organization face if cash forecasts are not accurate?

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    https://brainmass.com/business/cash-budgeting/117950

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    A firm has actual sales of $65,000 in April and $60,000 in May. It expects sales of $70,000 in June, $100,000 in July, and $100,000 in August. One quarter (25%) of these sales are cash.
    Of the credit sales, 70% are collected one month after the sale. The remaining 30% are collected two months after the sale. Each month the firm purchases inventory equal to 75% of the expected sales and pays for the purchases the following month. Salaries and commissions equal 20% of sales and other cash outflows total $10,000 per month. The cash balance as of May 31 was $5,000. The firm wishes to maintain a $5,000 minimum balance.
    Develop ...

    Solution Summary

    This solution is comprised of a detailed computation to prepare cash forecast covering three months.

    $2.19

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