Days Sales in Receivables a company has net income of $195,000, a prof

QUESTION

Days Sales in Receivables a company has net income of $195,000, a profit margin of 9.40 percent, and an accounts receivable balance of $106,851. Assuming 75 percent of sales are on credit, what are the companys days sales in receivables?
Concept: Days sales in receivables of company show the number of days taken by the company to collect revenue. It can be measured as: Days Sales in Receivables = (Account Receivables/Net Credit Sales)*365 Days Profit Margin measures the companys profitability. Profit Margin = Net Income/Net Sales Solution: Net Income of a company = $218000 Profit Margin = 8.70% So, Net Sales = $218000/8.70% =¦

$2505747.13 Account Receivables of company = $132850 Credit = 70% of sales Net Credit Sales = 70%*$2505747.13 = $1754022.99 So, Days Sales in Receivables = ($132850/$1754022.99)*365 Days = 27.65 days Therefore, companys days sales in receivables is 27.65 days .

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