Question

Deutsche Bearings has total sales of $9,941,987, inventories of $2,239,567, cash and equivalents of $799,034, and...

Deutsche Bearings has total sales of $9,941,987, inventories of $2,239,567, cash and equivalents of $799,034, and day's sales outstanding of 48 days. If the firm's management wanted its day's sales outstanding (DSO) to be 38 days, by how much will the accounts receivable have to change? Round your final answer to two decimal places. Hint: Use the given DSO to calculate the AR and work out the difference between the two AR.

A. -$272,383.21

B. $272,374.44

C. $272,109.23

D. -$272,109.23

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Answer #1

For Day's sales outstanding =48

Day's sales outstanding = 365 / (Sales / Accounts Receivables)

48 = 365 / ($9,941,987 / Accounts Receivables)

($9,941,987 / Accounts Receivables) = 365 / 48

Accounts Receivables = ($9,941,987 * 48 / 365)

Accounts Receivables = $1,307,439.39

For Day's sales outstanding =38

Day's sales outstanding = 365 / (Sales / Accounts Receivables)

38 = 365 / ($9,941,987 / Accounts Receivables)

($9,941,987 / Accounts Receivables) = 365 / 38

Accounts Receivables = ($9,941,987 * 38 / 365)

Accounts Receivables = $1,035,056.18

Change in Accounts Receivables = Accounts Receivables for DSO(38) - Accounts Receivables FOR DSO(48)

Change in Accounts Receivables = $1,035,056.18 - $1,307,439.39

Change in Accounts Receivables = - $272,383.21

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