On average how long did it take for the firm to collect from its customers in 2015? On average how long did it take for the firm to collect from its customers in 2015?
Balance Sheet and Income Statement |
||
ASSETS |
2015 |
2014 |
CASH AND MARKETABLE SECURITIES |
29,000 |
25,000 |
ACCOUNTS RECEIVABLE |
116,000 |
100,000 |
INVENTORIES |
145,000 |
125,000 |
CURRENT ASSETS |
290,000 |
250,000 |
GROSS PLANT AND EQUIPMENT |
362,000 |
350,000 |
LESS: ACCUMULATED DEPRECIATION |
130,000 |
100,000 |
NET FIXED ASSETS |
232,000 |
250,000 |
TOTAL ASSETS |
522,000 |
500,000 |
LIABILITIES AND EQUITY |
||
ACCOUNTS PAYABLE |
90,480 |
78,000 |
ACCRURALS |
34,800 |
30,000 |
NOTES PAYABLE |
25,420 |
34,000 |
CURRENT LAIBILITIES |
150,700 |
142,000 |
LONG TERM DEBT |
145,000 |
140,000 |
TOTAL LIABILITIES |
295,700 |
282,000 |
COMMON STOCK ($1.00 par) |
150,000 |
150,000 |
RETAINED EARNINGS |
76,300 |
68,000 |
TOTAL OWNER’S EQUITY |
226,300 |
218,000 |
TOTAL LIABILITIES AND EQUITY |
522,000 |
500,000 |
INCOME STATEMENT |
2015 |
2014 |
NET REVENUES & SALES (100,000 UNITS) |
812,000 |
700,000 |
COST OF GOODS SOLD |
522,000 |
450,000 |
GROSS PROFIT |
290,000 |
250,000 |
FIXED OPERATING EXPENSES (pre depreciation) |
174,200 |
151,000 |
EBITDA Earnings Before Interest, Taxes, Depreciation & Amortization |
115,800 |
99,000 |
DEPRECIATION EXPENSE |
30,000 |
25,000 |
OPERATING INCOME (EBIT) |
85,800 |
74,000 |
INTEREST |
14,500 |
14,000 |
INCOME BEFORE TAXES (EBT) |
71,300 |
60,000 |
INCOME TAXES (40%) |
28,520 |
24,000 |
NET INCOME |
42,780 |
36,000 |
Dividends |
34,480 |
28,500 |
Retained Earnings |
8,300 |
7,500 |
NUMBER OF SHARES OUTSTANDING |
50,000 |
50,000 |
Dividends per share |
0.6896 |
0.57 |
Industry Ratios |
|||||||
Current |
1.8 x |
Fixed Asset Turnover |
4.0x |
Net Profit Margin |
8.7% |
||
Quick |
1 x |
Total Asset Turnover |
1.3x |
ROA |
12.6% |
||
Inventory Turnover |
3.4x |
Debt Ratio |
45.0% |
ROE |
17.2% |
||
DSO |
42.1 days |
TIE |
6.5x |
Price/Earnings |
13.0x |
||
ROIC |
14.5% |
Market/Book |
2.0x |
The days required for the firm to collect from its customers in 2015 is the Average Collection Period (Days Sales Outstanding)
Average Collection Period (Days Sales Outstanding) is calculated by using the following formula
Average Collection Period (Days Sales Outstanding) = Average Accounts Receivables / Sales per day
Average Receivables = (Accounts Receivables at the beginning + Accounts Receivables at the end) / 2
= ($116,000 + $100,000) / 2
= $216,000 / 2
= $108,000
Sales per day = Total Revenue / 365 Days
= $812,000 / 365 Days
= $2,224.66 per Day
Therefore, the Average Collection Period (Days Sales Outstanding) is calculated by using the following formula
= $108,000 / $2,224.66
= 48.55 Days
“Hence, the it will take 48.55 Days for firm to collect from its customers in 2015”
On average how long did it take for the firm to collect from its customers in...
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