A company has net income of $189,000, a profit margin of 7.2 percent, and an acc

Question

A company has net income of $189,000, a profit margin of 7.2 percent, and an accounts receivable balance of $128,370. Assuming 80 percent of sales are on credit, what is the company’s days’ sales in receivables? (Use 365 days a year. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

A company has net income of $189,000, a profit margin of 7.2 percent, and an accounts receivable balance of $128,370. Assuming 80 percent of sales are on credit, what is the company’s days’ sales in receivables? (Use 365 days a year. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Explanation / Answer

Profit margin=net income/Sales

Hence Sales=(189000/0.072)=$2,625,000

Hence credit sales=(2,625,000*80%)=$2,100,000

Hence days sales in receivables=(AR/credit sales)*365 days

=(128370/2,100,000)*365 days

which is equal to

=22.31 days(Approx).

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.