Question

This year CVS reported sales of $602 million and accounts receivable of $59 million. If sales are projected to increase by 6% next year and accounts receivable as a percentage of sales is expected to remain the same, what would be the projected amount (in $ millions, rounded to one decimal place, e.g., $12.3 ) of accounts receivable for next year?

Answer 1

To calculate the projected amount of accounts receivable for CVS next year, first calculate the projected sales by increasing this year's sales by 6%, then apply the current ratio of accounts receivable to sales. The projected accounts receivable for next year would be $62.5 million.

Step-by-step explanation:

The student is interested in calculating the projected amount of accounts receivable for CVS for the next year given that this year CVS reported sales of $602 million and accounts receivable of $59 million, with an expected sales increase of 6% and accounts receivable maintaining the same percentage of sales.

First, we find the projected sales for next year by increasing this year's sales by 6%:

• $602 million × (1 + 0.06) = $638.12 million (projected sales)

Next, we calculate the ratio of accounts receivable to sales for this year:

• $59 million / $602 million = 0.098 (accounts receivable to sales ratio)

Finally, we apply this ratio to the projected sales to find the projected accounts receivable for next year:

• 0.098 × $638.12 million = $62.536 million (rounded to $62.5 million)