Question Help Efficiency analysis) The Brenmar Sales Company had a gross profit
ID: 2619019 • Letter: Q
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Question Help Efficiency analysis) The Brenmar Sales Company had a gross profit margin gross profits ÷ sales of 32 percent and sales of $9.6 milion last year 77 percent of the firm's sales are on credit, and the remainder are cash sales. Brenmar's current assets equal $1.4 million, its current liabilities equal $300,700, and it has $104,200 in cash plus marketable securities. a. If Brenmar's accounts receivable equal $562,500, what is its average collection period? b. If Brenmar reduces its average collection period to 15 days, what will be its new level of accounts receivable? c. Brenmar's inventory turnover ratio is 9.8 times. What is the level of Brenmar's inventories? a. If Brenmars accounts receivable equal $562,500, what is its average collection period? The company's average collection period will be days. (Round to two decimal places.) b. If Brenmar reduces its average collection period to 15 days, what will be its new level of accounts receivable? The new level of accounts receivable will be s(Round to the nearest dollar) c. Brenmar's inventory turnover ratio is 9.8 times. What is the level of Brenmar's inventories? Brenmar's inventories will be S(Round to the nearest dollar)Explanation / Answer
If Brenmar’s accounts receivable are $562,500, what is its average collection period.
ANSWER : a.Average collection period =365 * AR /average daily credit sales
= 365 * 562,500/7392000
= 27.77 or 28 Days
b) If Brenmar reduces its average collection period to 15 days, what will be its new level of accounts receivable?
ANSWER = Average collection period =365 * AR /average daily credit sales
15 = 365 * AR / 7392000
AR = 303781
c) Brenmar’s inventory turnover ratio is 9.8 times. What is the level of Brenmar’s inventories?
ANSWER = Inventory turnover ratio = Cost of Goods Sold / Inventory
9.8 = 6582000 / Inventory
Inventory = 666122
Gross profit Margin = 32 %
Cost of goods sold = 100 - 32 = 68%
Cost of goods sold = 9600000 * 0.68 = 6582000
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