**Budgeted Sales and Cash Flow Management****Budgeted Sales Overview:**| Month | Sales Revenue ||------------|---------------|| August | $15,000 || September | $13,000 || October | $20,000 || November | $16,000 || December | $11,000 |**Cash Collection Pattern:**- 50% of sales revenue is collected as cash in the month of the sale.- 30% is collected in the following month.- 20% is collected two months after the sale.**Task a: Compute Budgeted Cash Inflows for October and November**- **October Cash Inflows:** - Input required for computation (No Response)- **November Cash Inflows:** - Input required for computation (No Response)*Note:* Remember to account for September revenues impacting October cash inflows (e.g., 30% of September's revenue is collected in October).**Task b: Assessing Cash Flow Risks**- According to the income statement, the firm is profitable in the current year.- Can the firm run out of cash during the year? - Options: NO / YES**Examples of Cash Flow Risks:** (Select all that apply)- Rapid sales growth: Delays in cash inflow despite increased expenses.- Purchase of new equipment: Large cash outflow due to upfront costs.- Trick question: Profitability doesn’t guarantee positive cash flow.**Task c: Strategies to Address Cash Shortages**- What actions can a firm take to mitigate cash shortages? (Select all that apply) - Encourage cash payments from customers (offer a discount for cash payments). - Postpone equipment purchases. - Repay bank loans early to reduce debt. - Postpone payments to suppliers. - Borrow money. - Encourage customers to pay bills early (e.g., offer a discount for early payment).**Note:** The example highlights the complexities of managing cash flow separate from profitability and provides strategies for firms to handle potential cash shortages effectively.

Cash inflow is money coming into the business due to sale or investment. Sales can be on cash or credit. Credit sales are recorded in Accounts receivables. Accounts receivables are the amount to be received from the customers. It is a current asset for the business.October = (August sales * 20%) + (September sales * 30%) + (October sales * 50%) = (15000*20%) + (13000*30%) + (20000*50%) = $16900 November = (September sales * 20%) + (October sales * 30%) + (November * 50%) = (13000*20%) + (20000*30%) + (16000*50%) = $16600 Yes, if a firm is profitable in the current year, still firm can run out of the cash. The examples are as under: Rapid sales growth Purchase of new equipmentIt can do following to mitigate the cash shortage: Postpone equipment purchases Encourage customers to pay in cash Encourage customers to pay their bill early Postpone payments to suppliers. Borrow money