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A company has net income of $188,000, a profit margin of 9.20 percent, and an accounts...

A company has net income of $188,000, a profit margin of 9.20 percent, and an accounts receivable balance of $106,149. Assuming 66 percent of sales are on credit, what is the company's days' sales in receivables?

Solutions

Expert Solution

Compute the net sales, using the equation as shown below:

Net sales = Net income/ Profit margin

               = $188,000/ 9.20%

               = $2,043,478.26086

Hence, net sales are $2,043,478.26086.

Compute the net credit sales, using the equation as shown below:

Net credit sales = Net sales*Percentage of credit sales

                         = $2,043,478.26086*66%

                         = $1,348,695.65216

Hence, the net credit sales is $1,348,695.65216.

Compute the days’ sales in receivables, using the equation as shown below:

Days’ sales in receivables = Net credit sales/ Average receivables

                                          = $1,348,695.65216/ $106,149

                                          = 12.70568 days

Hence, the days’ sales in receivables is 12.70568 days.

jeff jeffy answered 1 year ago
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