REGRESSION AND RECEIVABLES Edwards Industries has $320 million in sales. The company expects that its sales will increase 12% 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: 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 and its year-end days sales outstanding (DSO) ratio? Assume that DSO is calculated on the basis of a 365-day year.
REGRESSION AND RECEIVABLES Edwards Industries has $320 million in sales. The company expects that its sales will increase 12% 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: 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 and its year-end days sales outstanding (DSO) ratio? Assume that DSO is calculated on the basis of a 365-day year.
Chapter18: The Management Of Accounts Receivable And Inventories
Section: Chapter Questions
Problem 2P
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REGRESSION AND RECEIVABLES Edwards Industries has $320 million in sales. The company expects that its sales will increase 12% 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:
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 and its year-end days sales outstanding (DSO) ratio? Assume that DSO is calculated on the basis of a 365-day year.
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