A firm is planning to improve collections next year. Management has forecast an ACP of 45 days which is a substantial improvement over the current ACP. Next year's sales are expected to be $120M. Next year's ending receivables balance should be planned at (Make calculations using ending balances and a 360-day year.)

Question

Quizplus · Accepted Answer

To determine the ending receivables balance, we can use the formula:

Ending receivables = (ACP/360) x Annual sales

Given that the forecasted ACP is 45 days, we can calculate the ending receivables as:

Ending receivables = (45/360) x $120M = $15M

Therefore, the best choice is B.

A Firm Is Planning to Improve Collections Next Year