A firm's annual credit sales are $1.71 million, with 49.56% of its daily average paid out in purchases. It usually takes the company 34days to meet its purchasing obligations. This payment pattern has not changed in recent years. However, the firm's commitment toaccounts receivable has shifted based on its current annual net income of $28.6k which meets the 3.44% required return, anticipatedby senior management a year earlier. Normally, the firm collects its accounts in 23 days, an average which remains unaffected.Required: In percentage terms, by how much are the firm's receivables greater (or less) than its payables?Note: The term "k is used to represent thousands (x $1.000).% (ROUND YOUR ANSWER TO 2 DECIMAL PLACES. FOR EXAMPLE: 17.23)

Receivables outstanding = 1710000×23/365= $107,753 Payables outstanding = 1710000×49.56%…

Answered: al credit sales ts purchasing ivable…

Business

Accounting

al credit sales ts purchasing ivable has shi agement a ye

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 1P

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Question

A firm's annual credit sales are $1.71 million, with 49.56% of its daily average paid out in purchases. It usually takes the company 34
days to meet its purchasing obligations. This payment pattern has not changed in recent years. However, the firm's commitment to
accounts receivable has shifted based on its current annual net income of $28.6k which meets the 3.44% required return, anticipated
by senior management a year earlier. Normally, the firm collects its accounts in 23 days, an average which remains unaffected.
Required: In percentage terms, by how much are the firm's receivables greater (or less) than its payables?
Note: The term "k is used to represent thousands (x $1.000).
% (ROUND YOUR ANSWER TO 2 DECIMAL PLACES. FOR EXAMPLE: 17.23)

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