The Daisy Company had net credit sales of $850,000 for the year. Cash sales for the year were $1,170,000. Its receivables at the beginning of the year were $43,000 and at the end of the year they had increased to $86,000. The Daisy Company has credit terms of net 30 days. Compute the days' sales outstanding and evaluate the ratio as strong or weak. (Round any intermediary calculations to two decimal places and your final answer to the nearest day.)

Question

Quizplus · Accepted Answer

Days' sales outstanding = (Average receivables / Net credit sales) x 365 daysAverage receivables = (Beginning receivables + Ending receivables) / 2= ($43,000 + $86,000) / 2= $64,500Days' sales outstanding = ($64,500 / $850,000) x 365 days= 28.28 days= 28 days (rounded to the nearest day)The industry average for days' sales outstanding is 30 days. Therefore, the Daisy Company's days' sales outstanding of 28 days is considered strong.

The Daisy Company Had Net Credit Sales of $850,000 for the Year