Question

Billing inc., has net income of $161000, a profit margin of 7.6 percent, and an accounts recievable balance of $127100. Assume that 66 percent of sales are on credit. What is the days' sales in receivables?

Answer 1

Answer:

Days' sales in receivables = 33.2 days

Explanation:

Days sales receivables is the average length of time it takes a business to collect the amount owing in respect of credit sales transaction. The shorter the days, the better.

Receivable days = Average receivables /Credit sales × 365 days

Net Income = Profit margin × Sales

Let "y" represent total sales

161,000 = 7.6% ×  y

y = 161,000/7.6%= 2,118,421.053

Credit sales = 66%× total sales

                      = 66%×2,118,421.053  =  1,398,158  

Days' sales in receivables = 127100/ 1,398,158  × 365 days =33.18 days

Days' sales in receivables = 33.2 days