How high can accounts receivable be allowed to grow before the firm's receivables period exceeds 50 days if annual sales equal $5 million and the cash conversion cycle equals 75 days?

Question

Quizplus · Accepted Answer

The receivables period is calculated as (Accounts Receivable / Annual Sales) * 365. To find the maximum accounts receivable for a 50-day period: (Accounts Receivable / $5,000,000) * 365 = 50. Solving for Accounts Receivable gives $684,932.

How High Can Accounts Receivable Be Allowed to Grow Before