Data on Shick Inc. for 2011 are shown below, along with the days sales outstandi

Question

Data on Shick Inc. for 2011 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

Benchmarks' days sales outstanding (DSO)         20.00

Explanation / Answer

New Account Recievable = 20/365*110000 = $6027.40

Receivables would be decline = 16000-6027.40 = $9927.60

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