Question

Leisure products has sales of $738,800, cost of goods sold of $598,200, and accounts receivable of $86,700. How long on average does it take the firm's customers to pay for their purchases? Assume a 365-day year.

Answer 1

Calculation of Average Collection period:

It is given that Leisure products have sales of $738,800 and accounts receivable of $86,700. It order to find how long on average does it take the firm's customers to pay for their purchases, we need to calculate the Average Collection period as follows:

Average Collection period = Average Accounts Receivable *365 / Sales Revenue

= 86700*365 / 738800

= 42.83

(Note: it is assumed that Average Accounts Receivable is $86,700)

Hence, it take around 42.83 days to the firm's customers to pay for their purchases.