Question

QUESTION 10: A company has an average collection period of 21 days. The firm’s annual credit sales total $23,389,300. Calculate the firm’s accounts receivable.

		$1,345,686
		$2,012,012
		$1,946,090
		$1,648,567
		none of these

QUESTION 11: A firm has an ROE of 18% and a ROA of 12%. What would the equity multiplier (leverage) be?

		.883
		1.02
		1.5
		20
		none of these

Answer 1

ANSWER 10

The correct answer is $1,345,686

Average collection period = 21 days

Annual credit sales = $23,389,300

Average collection period = 365 days / Accounts receivable turnover ratio

21 = 365 days / Accounts receivable turnover ratio

Accounts receivable turnover ratio = 365 / 21

= 17.3809523809

Accounts receivable turnover ratio = Net credit sales / Average accounts receivable

17.38 = $23,389,300 / Average accounts receivable

Average accounts receivable = $23,389,300 / 17.3809523809

= $1,345,686

ANSWER 11

The correct answer is 1.5

Return on equity(ROE) = Return on Asset (ROA) * Equity multiplier

0.18 = 0.12 * Equity multiplier

Equity multiplier = 0.18 / 0.12

= 1.5

Note - 18% can be written as 0.18 and 12% can be written as 0.12.