Help with #11. Thank you. ABCD Corporation has credit sales of $10,640,000 and r
ID: 2640769 • Letter: H
Question
Help with #11.
Thank you.
ABCD Corporation has credit sales of $10,640,000 and receivables of $1,520,000. a. What is the receivables turnover? b. What is the average collection period (days sales outstanding)? c. If the company offers credit terms of 30 days, are its receivables past due? A firm with sales of $500,000 has average inveontory of $200,000. TYhe industry average for inventory turnover is four times a year. What would be the reduction in inventory if this firm were to achieve a turnover comparable to the industry average?Explanation / Answer
inventory turnover ratio = sales/average inventory turnover
required inventory turnover = 4 times
=> sales/average inventory = 4
=> average inventory = 500000/4 = $125,000
hence the required reduction in inventory turnover
= given average inventory - calculated average inventory
= 200,000 - 125000
= $75,000 ....................ans
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