Receivables Investment Snider Industries sells on terms of 3/10, net 30. Total s
ID: 2650759 • Letter: R
Question
Receivables Investment
Snider Industries sells on terms of 3/10, net 30. Total sales for the year are $1,619,000. Thirty percent of the customers pay on the 10th day and take discounts; the other 70% pay, on average, 70 days after their purchases. Assume 365 days in year for your calculations.
What is the days sales outstanding? Round your answer to one decimal place.
What is the average amount of receivables? Round your answer to the nearest dollar.
What would happen to average receivables if Snider toughened up on its collection policy with the result that all nondiscount customers paid on the 30th day? Round your answer to the nearest dollar.
Explanation / Answer
What is the days sales outstanding? Round your answer to one decimal place.
Days sales outstanding = 10*30% + 70*70%
Days sales outstanding = 52 Days
What is the average amount of receivables? Round your answer to the nearest dollar.
Average amount of receivables = Sales*Days sales outstanding/365
Average amount of receivables = 1619000*52/365
Average amount of receivables = $ 230,652
What would happen to average receivables if Snider toughened up on its collection policy with the result that all nondiscount customers paid on the 30th day? Round your answer to the nearest dollar.
Days sales outstanding = 10*30% + 30*70%
Days sales outstanding = 24 Days
Average amount of receivables = Sales*Days sales outstanding/365
Average amount of receivables = 1619000*24/365
Average amount of receivables = $ 106,455
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