Reference no: EM132972873

Question - Below is the sales forecast, in dollars, for the upcoming year for Houseware Store. Houseware store collects 15% of each month's sales in cash, 49% one month later, and 32% the second month after the sale. 4% of sales are bad debt. A given month's purchases are 60% of the forecasted sales amount for that month and 15% of the previous months sales forecast( ¼ of materials are bought for cash, the other ¾ are paid on "net 30 terms"). The other cash flows for JUNE through AUGUST are $35 interest income to be received in JUNE, a principal repayment of $30 in JULY, interest payment of $50 in JUNE, tax payments of $80 in AUGUST, cash proceeds from asset sale of $65 in AUGUST, and payment for asset acquisitions of $45 in JULY. The company's policy mandates that a minimum of $150 be kept in cash at all times. Ending cash in MAY is projected to be $215, and the company has no outstanding short-term borrowing or investments at that time.

Month Sales Forecast

January $45

Feb. 48

Mar. 50

Apr. 52

May 63

Jun. 59

July 76

Aug. 83

Based on this information, prepare cash forecast for JUNE through AUGUST using the cash receipts and disbursements method.

Interpret your forecast. State the maximum funds available to be invested over this period, and the maximum funds needed to be borrowed.