Question

Louis Inc. has net income $2,500,000, a profit margin of 8% and accounts receivables of $1,000,000. Assuming 75% of sales are on credit, calculate the company's days sales in receivables. (Round to 2 decimals)

Answer 1

Sales = Net Income/ Profit Margin

= $ 2500000 / 8%

= $ 31250000

Credit Sales = Sales * 75%

= $ 31250000 * 75%

= $ 23437500

Particulars	Amount
Avg Account Receiavbles	$                   10,00,000.00
Credit Sales	$                2,34,37,500.00
No. of Days per anum	365
Credit sales per day	$                         64,212.33

Days Sales in Receivables = Avg Accounts Receivables / Credit sales per day
= 1000000 / 64212.33
= 15.57
= 15.57 Days