A firm has sales of 13 million and 15 percent of the sales a

A firm has sales of $1.3 million, and 15 percent of the sales are for cash. The year-end accounts recelvable balance is $150,000 What is the average collection period? (Use a 360-day year. Do not round intermediate calculations. Round your final answer to 2 decimalplaces Average collection period days

Solution

Average collection period= Account receivable balance / Net credit sales per day

=150,000 / [1.3-15%/360]

=48.86 days

a.Current ratio=Current asset / Current liability

=[46000+345000+323000]/[277000+94000]

=714000/371000

=1.92

b.Quick ratio

= [ Total Current Assets – Inventories ] / Total Current Liabilities

=[46000+345000]/371000

=1.05

c. Debt to total asset ratio=Total debt / Total asset

=510,000/1104000=.46

d.Asset turn over ratio= Turn over / Asset

=31,60,000/11,04,000=2.86

e.Average collection period= Account receivable balance / Net credit sales per day

=345000/[3160,000*75%/360]

=345000/6583.33

=52.41 days