The balance sheet and income statement shown below are for Koski Inc. Note that

Question

The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over. Balance Sheet (Millions of $) Assets 2010 Cash and securities $1,540 Accounts receivable 10,120 Inventories 14,080 Total current assets $25,740 Net plant and equipment $18,260 Total assets $44,000 Liabilities and Equity Accounts payable $8,360 Notes payable 6,160 Accruals 4,840 Total current liabilities $19,360 Long-term bonds $12,320 Total debt $31,680 Common stock $2,640 Retained earnings 9,680 Total common equity $12,320 Total liabilities and equity $44,000 Income Statement (Millions of $) 2010 Net sales $83,600 Operating costs except depreciation 78,166 Depreciation 1,463 Earnings bef interest and taxes (EBIT) $3,971 Less interest 1,155 Earnings before taxes (EBT) $2,816 Taxes 986 Net income $1,830 Other data: Shares outstanding (millions) 500.00 Common dividends (millions of $) $640.64 Int rate on notes payable & L-T bonds 6.25% Federal plus state income tax rate 35% Year-end stock price $43.93 What is the firm's days sales outstanding? Assume a 365-day year for this calculation. a. 34.02 b. 36.23 c. 51.25 d. 44.18 e. 53.90

Explanation / Answer

Calulation of Firm's Days Sales Outstanding(DSO)

DSO = Accounts Receivable / Average sales per day

Where,

Accounts Receivable = 10120 (Given)

Average Sales per day = Total Sales / No. of days per year

                                      =83600/365

                                      =229.04

Putting both the values in DSO formula:

DSO = 10120 / 229.04

        =44.18

Hence correct answer is option d

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