A firm's annual credit sales are $171 million, with 49.56% of its daily average paid out in purchases. It usually takes the company 34 days to meet its purchasing obligations. This payment pattern has not changed in recent years. However, the firm's commitment to accounts receivable has shifted based on its current annual net income of $28.6k which meets the 3.44 % required return, anticipated by senior management a year earlier. Normally, the firm collects its accounts in 23 days, an average which remains unaffected. Required: In percentage terms, by how much are the firm's receivables greater (or less) than its payables?

A firm's annual credit sales are $171 million, with 49.56% of its daily average paid out in purchases. It usually takes the company 34 days to meet its purchasing obligations. This payment pattern has not changed in recent years. However, the firm's commitment to accounts receivable has shifted based on its current annual net income of $28.6k which meets the 3.44 % required return, anticipated by senior management a year earlier. Normally, the firm collects its accounts in 23 days, an average which remains unaffected. Required: In percentage terms, by how much are the firm's receivables greater (or less) than its payables?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 1P

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