6. Assuming that a company has $365 million in annual sales, and a gross margin

Question

6. Assuming that a company has $365 million in annual sales, and a gross margin of 20%, how much investment will each additional day of sales in accounts receivable require?
5. Assuming that a company has $365 million in annual sales, and a gross margin of 20%, how much investment will each additional day of sales in inventory require?

I have asked this question previously and the answer was the same for both. If you look at the questions they are the same EXCEPT the last few words...one is asking for accounts receivable required and the other is asking for inventory required...

Explanation / Answer

6. 365/365= 1 million 5. 365*(1-.2)/365 = 0.8 million A/R is on sales, inventory is on cost of goods sold (sales minus gross margin).

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