Asked by Camila Ramirez on Jun 03, 2024
Verified
A company reported net sales for Year 1 of $285,000 and $575,000 for Year 2. The year-end balances of accounts receivable were $49,000 for Year 1 and $85,000 for Year 2. Calculate the days' sales uncollected at the end of each year for this company and describe any changes in the apparent liquidity of the company's receivables.
Days' Sales Uncollected
Represents the average number of days it takes a company to collect payment after a sale has been made.
- Elucidate the importance and process of calculating the days' sales uncollected ratio.
Verified Answer
ZK
Zybrea KnightJun 06, 2024
Final Answer :
Year 1: ($49,000/$285,000) x 365 = 63 days
Year 2: ($85,000/$575,000) x 365 = 54 days
The decrease of 9 days means that this company has improved its management of receivables and its liquidity position.
Year 2: ($85,000/$575,000) x 365 = 54 days
The decrease of 9 days means that this company has improved its management of receivables and its liquidity position.
Learning Objectives
- Elucidate the importance and process of calculating the days' sales uncollected ratio.
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