Chapter 6, Problem 2FSA

1.

Summary Introduction

Introduction: Day’s sale uncollected is defined as the financial measure concerning to the compatibility of the company that represent how long it will take to collect account receivable. Day’s sale uncollected helps to find how long the customers will take to pay back the money taken on credit basis. It determines the strength and internal control of the organizations.

To calculate: Days sales uncollected for the two companies mentioned of the two consecutive years and any company trends. Largest percentage in day’s sales uncollected in two years.

Answer to Problem 2FSA

For A, day’s sale uncollected account for current year is 26.67 days and for previous year is 26.31 days.For A, day’s sale uncollected account for current year is57.16 daysand for previous year is56.24 days.

Explanation of Solution

For A:

Day’s sale uncollected is defined as the financial measure concerning to the compatibility of the company that represent how long it will take to collect account receivable. Computation of the day’s sale uncollected of first company for current year is:

  $Day\text{'}ssalesuncollectedofcurrentyear=\frac{Accountsrecievable}{Netsales}\times 365$

  $Day\text{'}ssalesuncollectedofcurrentyear=\frac{15,754}{2,15,639}\times 365$

  $\text{Day's sales uncollected of current year = 26}\text{.67 days}$

Hence, it is certain that the day’s sale uncollected account is 26.67 days.

  $Day\text{'}ssalesuncollectedofprioryear=\frac{Accountsrecievable}{Netsales}\times 365$

  $Day\text{'}ssalesuncollectedofprioryear=\frac{16,849}{2,33,715}\times 365$

  $\text{Day's sales uncollected of prior year = 26}\text{.31 days}$

Hence, it is certain that the day’s sale uncollected account is 26.31 days.

Thus day’s sales uncollected of the first company has declined by 0.36 (26.67-26.31) days.

For G:

Day’s sale uncollected is defined as the financial measure concerning to the compatibility of the company that represent how long it will take to collect account receivable. Computation of the day’s sale uncollected of second company for current year is:

  $Day\text{'}ssalesuncollectedofcurrentyear=\frac{Accountsrecievable}{Netsales}\times 365$

  $Day\text{'}ssalesuncollectedofcurrentyear=\frac{14,137}{90,272}\times 365$

  $\text{Day's sales uncollected of current year = 57}\text{.16 days}$

Hence, it is certain that the day’s sale uncollected account is 57.16 days

  $Day\text{'}ssalesuncollectedofprioryear=\frac{Accountsrecievable}{Netsales}\times 365$

  $Day\text{'}ssalesuncollectedofprioryear=\frac{11,556}{74,989}\times 365$

  $\text{Day's sales uncollected of prior year = 56}\text{.24 days}$

Hence, it is certain that the day’s sale uncollected account is 56.24 days.

Thus day’s sales uncollected of the second company has declined by 0.92 (57.16-56.24) days.

2.

Summary Introduction

Introduction: Day’s sale uncollected is defined as the financial measure concerning to the compatibility of the company that represent how long it will take to collect account receivable. Day’s sale uncollected helps to find how long the customers will take to pay back the money taken on credit basis. It determines the strength and internal control of the organizations.

To Determine: The Company which had more success collecting receivable.

Answer to Problem 2FSA

G had more success collecting receivable.

Explanation of Solution

The day’s sales uncollected for first company are 0.36 days and second company is 0.92 days. So, A was unable to manage to improve upon the number of day’s sales uncollected however G was able to improve a lot on day’s sales uncollected. Therefore, G had more success collecting receivable.