Question

The Daisy Company had net credit sales of​ $830,000 for the year. Cash sales for the year were​ $1,170,000. Its receivables at the beginning of the year were​ $45,000 and at the end of the year they had increased to​ $90,000. The Daisy Company has credit terms of net 30 days. Compute the​ days' sales outstanding and evaluate the ratio as strong or weak.​ (Round any intermediary calculations to two decimal places and your final answer to the nearest​ day.)

Answer 1

The​ days' sales outstanding is 29.68 days and we assume it is a weak ratio

Step-by-step explanation:

In this question, we need to use the formula of the days' sales outstanding which is presented below:

= (Average accounts receivables ÷ Net credit sales) × total number of days in a year

where,

Average accounts receivables = (Beginning account receivable + ending account receivables) ÷ 2

= ($45,000 + $90,000) ÷ 2

= $67,500

And, the net credit sales is $830,000

Now put these values to the above formula

So, the value would equal to

= ($67,500 ÷ $830,000) × 365 days

= 29.68 days

It shows same so we assume it is a weak ratio