REGRESSION AND RECEIVABLES Edwards Industries has $320 million in sales. The company expects that its sales...

REGRESSION AND RECEIVABLES

Edwards Industries has $320 million in sales. The company expects that its sales will increase 13% 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 = $10.25 + 0.10(Sales)

a.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.

b. 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-days year. Do not round intermediate calculations. Round your answer to two decimal places.

Expert Solution

Sales	230.00
Growth %	0.13
Receivables	$10.25+(0.1)*(Sales)
No of days	365.00
Sales Forecast
Sales at year end	Sales * (1+Growth%)
	259.90
a. Receivables	36.24

DSO	Receivables/Average Sales
Average Sales	Sales/No of Days in the accounting period
Average Sales (259.9/365)	0.71
b. DSO (36.24/0.71)	50.89

jeff jeffy answered 1 month ago

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