ABC has Days Sales Outstanding (DSO) of 10.1 days. Annual sales are expected to be 5,545,000....

Question:

ABC has Days Sales Outstanding (DSO) of {eq}10.1 {/eq} days. Annual sales are expected to be {eq}5,545,000 {/eq}. Using a {eq}365 {/eq} day year, compute the level of the firm's accounts receivable.

Days Sales Outstanding:

Days Sales Outstanding (DSO) measures the number of days it takes for a firm to receive cash for the goods sold on credit or receivables. A high DSO indicates that the cash of the company is blocked for a longer period which might increase the cash conversion cycle. It would also indicate a poor credit terms of the company. Therefore, DSO is a very important measure in understanding how well the company is managing its receivables.

Answer and Explanation: 1

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Information Provided:

Days Sales Outstanding (DSO) = 10.1 days

Annual Sales = $5,545,000

DSO is calculated as below

DSO = (Accounts receivables /...

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