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RECEIVABLES INVESTMENT Leyton Lumber Company has sales of 89 million per year, all on creda terms calling for payment within
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Answer #1

a. Leyton's DSO is computed as shown below:

= ( Accounts receivables / Sales ) x 365 days

= ( $ 1.35 million / $ 9 million ) x 365 days

= 54.75 days

b. The DSO will be computed as follows:

= ( Accounts receivables / Sales ) x 30 days

= ( $ 1.35 million / $ 9 million ) x 30 days

= 4.50 days

c. The capital that would be released is computed as follows:

= ( Sales / 365 ) x 30

= ( $ 9 million / 365 ) x 30

= $ 739,726.03 Approximately

Feel free to ask in case of any query relating to this question

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