Question

Intro Morgan Valley Inc. has current sales of $460,000. All of its sales are on credit and there is no default. It currently sells on terms of net 30 and has an accounts receivable balance of $60,000 The company is considering a new credit policy with terms of net 60. Under the new policy, sales are expected to increase to $520,000, and accounts receivable are expected to increase to $120,000 Attempt 1/5 for 10 pts. IB Part 1 What is the firm's days sales outstanding under the old policy? No decimals Submit Attempt 1/5 for 10 pts. Part 2 IB What is the firm's days sales outstanding under the old policy? No decimals Submit

both are the same i checked and rechecked the question.

Answer 1

$Days sales outstanding = \frac{Accounts Receivable}{Total Credit Sales} X No. of Days in the year$

$Days sales outstanding = \frac{\$60,000}{\$460,000} X 365$

$Days sales outstanding = .130435 X 365$

$Days sales outstanding = 47.6087$

So the firms days sales outstanding under the old policy will be 48 (Rounded up) Days

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