Data on Nathan Enterprises for the most recent year are shown below, along with the days...
Data on Nathan Enterprises for the most recent year are shown below, along with the days sales outstanding of the firms against which it benchmarks. The firm's new CFO believes that the company could reduce its receivables enough to reduce its DSO to the benchmarks' average. If this were done, by how much would receivables decline? Use a 365-day year.
|
Sales |
$110,000 |
|
Accounts receivable |
$16,000 |
|
Days sales outstanding (DSO) |
53.09 |
|
Benchmark days sales outstanding (DSO) |
20.00 |
Homework Answers
| Ans. | Reduction in Receivables = Old Receivables - New Receivables | |||
| 16000 - 6027 | ||||
| 9973 | ||||
| *Receivables would decline by $9973. | ||||
| Old Receivables = 16000 | ||||
| New Receivables = Benchmark DSO / No. of days in year * Sales | ||||
| 20 / 365 * 110000 | ||||
| 6027 | (rounded) | |||
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