Data on Nathan Enterprises for the most recent year are shown below, along with the days sales outstanding of the firms against which it benchmarks.The firm's new CFO believes that the company could reduce its receivables enough to reduce its DSO to the benchmarks' average.If this were done, by how much would receivables decline? Use a 365-day year. $$\begin{array} { l r }
\text { Sales } & \$ 110,000 \
\text { Accounts receivable } & \$ 16,000 \
\text { Days sales outstanding (DSO) } & 53.09 \
\text { Benchmark days sales outstanding (DSO) } & 20.00
\end{array}$$
A) $8,078
B) $8,975
C) $9,973
D) $10,970
E) $12,067

Question

Data on Nathan Enterprises for the most recent year are shown below, along with the days sales outstanding of the firms against which it benchmarks.The firm's new CFO believes that the company could reduce its receivables enough to reduce its DSO to the benchmarks' average.If this were done, by how much would receivables decline? Use a 365-day year. $$\begin{array} { l r } 
\text { Sales } & \$ 110,000 \
\text { Accounts receivable } & \$ 16,000 \
\text { Days sales outstanding (DSO) } & 53.09 \
\text { Benchmark days sales outstanding (DSO) } & 20.00
\end{array}$$
A) $8,078
B) $8,975
C) $9,973
D) $10,970
E) $12,067

Quizplus · Accepted Answer

To find the decline in receivables, calculate the target receivables using the benchmark DSO: Target Receivables = (Sales / 365) * Benchmark DSO = ($110,000 / 365) * 20 = $6,027. Subtract this from the current receivables: $16,000 - $6,027 = $9,973.

Data on Nathan Enterprises for the Most Recent Year Are