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This year, ABC had sales of $23,436,000 and an Accounts Receivable Turnover Ratio (Sales / Accounts...

  1. This year, ABC had sales of $23,436,000 and an Accounts Receivable Turnover Ratio (Sales / Accounts Receivable) of 8.7. ABC projects that next year, its sales will grow by 10 percent while its Accounts Receivable Turnover Ratio will drop to 8.4. If that happens, what will be the total dollar amount in accounts receivable next year?
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Answer #1

Answer:
Current Year Sales = $23,436,000
Growth Rate = 10%
Expected Sales in next year = $23,436,000 * 1.10
Expected Sales in next year = $25,779,600

Expected Accounts Receivable Turnover Ratio = 8.40

Accounts Receivable Turnover Ratio = Sales / Accounts Receivable
8.40 = $25,779,600 / Expected Accounts Receivable
Expected Accounts Receivable = $3,069,000

If Accounts Receivable Turnover ratio drops to 8.40, the total dollar amount in Accounts Receivable during the next year will be $3,069,000.

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