Answer to Question #285361 in Financial Math for Anika

Question

Retro Company has cash of TK 100,000. its sales are Tk 600,000of which 87% is cost of goods sold and 43% is the accounts receivable. Assuming a 360 day year, the average number of days that retro takes to collect its outstanding sales is

Answer 1

average number of days that retro takes to collect its outstanding sales:

Receivable turnover in days = 365 / Receivable turnover ratio

where

Receivable Turnover Ratio = Net Credit Sales / Average Accounts Receivable

we have:

Net Credit Sales = $600000(1-0.87)=78000$

Average Accounts Receivable = $(100000+600000\cdot0.43)/2=179000$

then, average number of days that retro takes to collect its outstanding sales:

$360\cdot78000/179000=156.87$