Question

QUE 1

                                                                                 

	1993	1994	1995	1996
Days sales in inventory	140.96	121.38	147.60	143.84
Receivables    Turnover	333.33	333.33	243.30	333.33
(Days sales outstanding) Days sales Receivables	1.10	1.10	1.56	1.10

Explain why the days sales outstanding and the days in Receivables Turnover differs in one specific year.

Answer 1

The days sales outstanding refers to number of days the accounts receivable were outstanding that is number of days it took to collect cash from customer while receivables turnover is the number of times the receivables are converted into cash. The days sales outstanding and the days in receivables turnover are both different ratio and hence they differ in specific year. The days sales receivables outstanding is lower that is 1.10 days and therefore the number of times receivables converted into cash is 333.33 times in a year. The days sales outstanding is calculated as 365 divided by receivable turnover.

Both the ratio are different and therefore they differ in one specific year.