Efficiency ratio If Norwood Corp management wants to reduce

Efficiency ratio; If Norwood Corp\' management wants to reduce the DSO from that calculated in problem 4.16 to an industry average of 56.3 days and its net sales are expected to decline by about 12 percent, what would be the new level of receivables

Solution

As the question is not complete.

The sales are taken from previous problem 4.16 i.e., $6,216,900

The new level sales will be ($6,216,900 * (1-0.12)) = $5,470,872

Target DSO will be 56.3 days

New level of receivables = (56.3 days * $5,470,872)/365 days

= $843,863.

Therefore the new level of receivables are = $843,863.