1 Baker Brothers has a DSO of 40 days and its annual sales a

1. Baker Brothers has a DSO of 40 days, and its annual sales are $7,300,000. What is its accounts receivable balance? Assume that it uses a 365-day year.

Solution

Days sales outstanding = (Account receivable/ total sales) * 365

40 = (Account receivable/ 7300000) * 365

Account receivable = (40 * 7300000)/ 365

                                = 292000000/ 365

                                = 800000