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2. 16-4: The Cash Conversion Cycle Receivables investment Lamar Lumber Company has sales of $8 million...

2. 16-4: The Cash Conversion Cycle Receivables investment Lamar Lumber Company has sales of $8 million per year, all on credit terms calling for payment within 30 days; and its accounts receivable are $1.2 million. Assume 365 days in year for your calculations.

What is Lamar's DSO? Round your answer to two decimal places. ________ days

What would DSO be if all customers paid on time? Round your answer to two decimal places. ____________ days

How much capital would be released if Lamar could take actions that led to on-time payments? Round your answer to the nearest cent. $ ________

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Answer #1
Ans.1 DSO =   Receivables / Annual sales * 365 days
1200000 / 8000000 * 365
54.75 days
Ans.2 If Customers paid on time:
DSO =   Receivables / Annual sales * 30 days
1200000 / 8000000 * 30
4.50 days
Ans.3 If Lamar could take actions that led to on-time, the capital would be released:
Accounts receivables = Annual sales / 365 * 30 days
8000000 / 365 * 30
657534.2466
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