Faldo Corp sells on terms that allow customers 45 days to pay for merchandise. I
ID: 2679806 • Letter: F
Question
Faldo Corp sells on terms that allow customers 45 days to pay for merchandise. Its sales last year were $325,000, and its year-end receivables were $60,000. If its DSO (or ACP) is less than the 45-day credit period, then customers are paying on time. Otherwise, they are paying late. By how much are customers paying early or late? Base your answer on this equation: DSO - Credit Period = Days early or late, and use a 365-day year when calculating the DSO. A positive answer indicates late payments, while a negative answer indicates early payments.Explanation / Answer
45 days-----credit period
sales--------$435,000,
sales / day =$435,000, /365 = $ 1191.78
receivables ---------$60,000.
company DSO= receivables /SALES PER DAY= $60,000/ 1191.78= 50.34
company DSO ---CREDIT PERIOD= 50.34 --45= +5.34
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