A firm has projected sales in May, June, and July of €100, €200, and €300, respectively. The firm makes 20 percent of sales for cash and collects the balance one month following the sale. The firm's total cash receipts in July

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The firm makes 20% of sales for cash, therefore, in May the firm receives €20 in cash (20% of €100), leaving a balance of €80 to be collected in June. In June, the firm receives €40 in cash (20% of €200) and collects €80 from the month of May, leaving a balance of €180 to be collected in July. In July, the firm collects the balance of €180 from the previous month and the full amount of sales for the current month of €300, for a total of €480. Therefore, the firm's total cash receipts in July are €220 (€20+€40+€180+€240).

A Firm Has Projected Sales in May, June, and July