Billings Inc. has net income of $161,000, a profit margin of 7.6 percent, and an accounts receivable balance of $127,100. Assume that 66 percent of sales are on credit. What is the days' sales in receivables?
A) 21.90 days
B) 27.56 days
C) 33.18 days
D) 35.04 days
E) 36.19 days

Question

Quizplus · Accepted Answer

To find the days' sales in receivables, first calculate the total sales using the profit margin: Sales = Net Income / Profit Margin = $161,000 / 0.076 = $2,118,421.05. Since 66% of sales are on credit, Credit Sales = $2,118,421.05 * 0.66 = $1,398,157.89. The days' sales in receivables is then calculated as (Accounts Receivable / Credit Sales) * 365 = ($127,100 / $1,398,157.89) * 365 = 33.18 days.