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Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977
Textbook Problem

DAYS SALES OUTSTANDING Baker Brothers has a DSO of 40 days, and its annual sales are $7,300,000. What is its accounts receivable balance? Assume that it uses a 365-day year.

Summary Introduction

To determine: Account receivable balance.

Days Sales Outstanding (DSO): It is also known as average collection period, it represents the time period that a firm will take to collect its receivables. DSO is determined by dividing receivables to annual sales per day.

Explanation

Solution:

Given,

Days sales outstanding (DSO) are 40 days.

Annual sales are $7,300,000.

Formula to calculate receivables,

Account receivables=Days sales outstanding×Annual sales365

Substitute 40 for days sales outstanding and $7,300,000 for annual sales in the above formula,

Account receivables

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