Question

Gates Corp. has net income of $172,000, sales of $ 1,453,909, and an accounts receivable balance of $127,100. Assume that 100% percent of sales are on credit. What is the days' sales in receivables?

Answer 1

Answer:

Days' sales in receivables= 31.91 days

Explanation:

The day's sales in account receivable ratio is also called average collection period. It states the number of days on the average to collect a business's account receivable.

Days sales turnover is calculated by dividing total number of days in a year by the account recievables turnover ratio.

The formula for accounts receivable turnover ratio= Current credit sales received/ Accounts receivable balance

Accounts receivable turnover= 1,453,909/127,100

Accounts receivable turnover= 11.439

Assume a 365 day year

Days' sales in receivables= 365/Account receivable turnover

Days' sales in receivables= 365/11.439

Days' sales in receivables= 31.908~ 31.91 days