Budgeted sales revenue for the coming five months is as follows:

Month Sales revenue
August $110,000
September $105,000
October $150,000
November $110,000
December $170,000

You estimate that you will collect 30% of sales revenue in the month of sale, 35% in the following month, 30% two months after the sale, and the remaining 5% three months after the sale.


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.