Answer:
it takes the company 46.4 days to collect payment for its credit sales.
Explanation:
To find the days sales outstanding, we first need to calculate the average accounts receivable balance based on the credit sales made by the company. Since 75% of the sales are credit sales, the average accounts receivable balance can be calculated as follows:
Average accounts receivable = (Accounts receivable balance / Credit sales) x Number of days in the year
where the number of days in the year is usually taken as 365.
So, we have:
Credit sales = 75% x BC 5 million
= BC 3.75 million
Average accounts receivable = (Br 475000 / BC 3.75 million) x 365
= 46.4 days (rounded to one decimal place)
Therefore, the days sales outstanding for the company is approximately 46.4 days. This means that on average, it takes the company 46.4 days to collect payment for its credit sales.