Receivables investment PLEASE ROUND CORRECTLY AND FOLLOW WHAT THE PROBLEM SAYS T
ID: 2768039 • Letter: R
Question
Receivables investment PLEASE ROUND CORRECTLY AND FOLLOW WHAT THE PROBLEM SAYS THANKS
Lamar Lumber Company has sales of $11 million per year, all on credit terms calling for payment within 30 days; and its accounts receivable are $1.65 million. Assume 365 days in year for your calculations.
What is Lamar's DSO? Round your answer to two decimal places.
days
What would DSO be if all customers paid on time? Round your answer to two decimal places.
days
How much capital would be released if Lamar could take actions that led to on-time payments? Round your answer to the nearest cent.
$
Explanation / Answer
Details Amt $ Annual Credit Sales $ 11,000,000 Average accounts receivable $ 1,650,000 Receivable turnover =11M/1.65 M= 6.67 DSO=365/6.67= 54.75 days If All customers pay in Time DSO will be 30 days Receivable Turnover when DSO is 30=365/30= 12.17 Average Accounts Receivable balance =11M/12.17= $ 904,109.6 So Average accounts receivable when DSO =30 days $ 904,109.6 Average Accounts receivable when DSO is 54.75 days= $ 1,650,000 Additional capital released when On tile payment os enforced= $ 745,890.4
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