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Billings, Inc. has net income of $161,000, a profit margin of 7.6 percent, and an average...

Billings, Inc. has net income of $161,000, a profit margin of 7.6 percent, and an average accounts receivable balance of $127,100. Assume that 66% of sales are credit sales. What is the average collection period of the receivables?

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Answer #1

Sales = Net income/ Profit margin

          = 161000/ .076

          = 2118421.05

Credit sales = 2118421.05* 66% =1398157.89

Average collection period = 365 * Average accounts receivable / Credit sales

                    = 365 * 127100/1398157.89

                     = 33.18 days

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