The financial statements of Flathead Lake Manufacturing Company are shown below.

Note: The common shares are trading in the stock market for $15 per share.
Refer to the financial statements of Flathead Lake Manufacturing Company. The industry average ACP is 32 days. How is Flathead doing in its collections relative to the industry? (Please keep in mind that when a ratio involves both income statement and balance sheet numbers, the balance sheet numbers for the beginning and end of the year must be averaged.)
A) Flathead's receivables are outstanding about 9 fewer days than the industry average.
B) Flathead's receivables are outstanding about 15 fewer days than the industry average.
C) Flathead's receivables are outstanding about 12 more days than the industry average.
D) Flathead's receivables are outstanding about 6 more days than the industry average.

Question

The financial statements of Flathead Lake Manufacturing Company are shown below.

Note: The common shares are trading in the stock market for $15 per share.
Refer to the financial statements of Flathead Lake Manufacturing Company. The industry average ACP is 32 days. How is Flathead doing in its collections relative to the industry? (Please keep in mind that when a ratio involves both income statement and balance sheet numbers, the balance sheet numbers for the beginning and end of the year must be averaged.)
A) Flathead's receivables are outstanding about 9 fewer days than the industry average. 
B) Flathead's receivables are outstanding about 15 fewer days than the industry average. 
C) Flathead's receivables are outstanding about 12 more days than the industry average. 
D) Flathead's receivables are outstanding about 6 more days than the industry average.

Quizplus · Accepted Answer

Average AR = ($600,000 + 570,000)/2 = $585,000
ACP - Average AR/Sales × 365 = $585,000/$9,300,000 × 365 = 22.9597

The Financial Statements of Flathead Lake Manufacturing Company Are Shown