ata on Nathan Enterprises for the most recent year are shown below, along with t
ID: 2748748 • Letter: A
Question
ata on Nathan Enterprises for the most recent year are shown below, along with the days sales outstanding of the firms against which it benchmarks. The firm's new CFO believes that the company could reduce its receivables enough to reduce its DSO to the benchmarks' average. If this were done, by how much would receivables decline? Use a 365-day year.
Sales $110,000
Accounts receivable $16,000
Days sales outstanding (DSO) 53.09
Benchmark days sales outstanding (DSO) 20.00
a. $9,972 b. $6,027 c. $10,970 d. $16,000 e. $8,078
Explanation / Answer
target DSO = 365*target accounts receivables/sales
20 = 365*target accounts receivables/110000
target accounts receivables = 6027.397
Decline in accounts receivables = 16000 - 6027.397 = 9972
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