Regression and receivables Edwards Industries has $350 million in sales. The com
ID: 2722639 • Letter: R
Question
Regression and receivables Edwards Industries has $350 million in sales. The company expects that its sales will increase 8% this year. Edwards' CFO uses a simple linear regression to forecast the company's receivables level for a given level of projected sales. On the basis of recent history, the estimated relationship between receivables and sales (in millions of dollars) is as follows: Receivables = $13.75 + 0.12(Sales) Given the estimated sales forecast and the estimated relationship between receivables and sales, what are your forecasts of the company's year-end balance for receivables? Enter your answer in millions. For example, an answer of $25,000,000 should be entered as 25. Round your answer to two decimal places. $ million What are your forecasts of the company's year-end days sales outstanding (DSO) ratio? Assume that DSO is calculated on the basis of a 365-day year. Round your answer to two decimal places. days
Explanation / Answer
Receivables =$13.75+.12*378
=$59.11
DSO=($59.11/$378)*365
=57.08days
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