1. The conservative strategy for financing a deficit (borrowing long-term) will normally be more profitable than the aggressive strategy

a. true

b. false

2. Which of the following is a payment option for the financial manager purchasing on credit

Select one:

a. Pay on the day of purchase

b. payment at the end of the cash discount period

c. pay at the end of the credit period

d. all of the above

e. none of the above

Problem 1 (20 points).

Below is the sales forecast, in dollars, for the upcoming year for Houseware Store. Houseware store collects 15% of each months sales in cash, 49% one month later, and 32% the second month after the sale. 4% of sales are bad debt. A given months purchases are 60% of the forecasted sales amount for that month and 15% of the previous months sales forecast( of materials are bought for cash, the other 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 companys 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. (Keep 2 decimal digits)

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

Which of the following is a payment option for the financial manager purchasing on credit

Select one:

a. Pay on the day of purchase

b. payment at the end of the cash discount period

c. pay at the end of the credit period

d. all of the above

e. none of the above