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stranahan stranahan
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Posts: 3324
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7 years ago
Perfect Purchase Electronics
   Selected Income Statement Items, 2009
Cash Sales   $1,500,000
Credit Sales   $7,500,000
Total Sales   $9,000,000
COGS   $6,000,000

   Perfect Purchase Electronics
   Selected Balance Sheet Accounts
   12/31/2009   12/31/2008   Change
Accounts Receivable   $270,000   $240,000   $30,000
Inventory   $125,000   $100,000   $25,000
Accounts Payable   $110,000   $90,000   $20,000

Using the information provided, what is the collection cycle for the firm?
A) 10.34 days
B) 12.41 days
C) 7.60 days
D) 6.84 days
Textbook 
Financial Management: Core Concepts

Financial Management: Core Concepts


Edition: 2nd
Author:
Read 152 times
2 Replies

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Replies
wrote...
#1
7 years ago
B -- 1. Average accounts receivable = beginning AR + ending AR /2
   = $270,000 + $240,000 /2
   = $255,000.
2. Accounts receivable turnover = credit sales/ average AR
   = $7,500,000/$255,000
   = $29.41 times.
3. Collection cycle = 365/AR turnover
   = 365/29.41
   = 12.41 days
stranahan Author
wrote...
#2
7 years ago
Thank you for  the help. I had a few questions on a few of them and this really confirmed my answers.
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