Question

Use the following selected financial information for Wilcox Corporation to answer questions 11-20. Wilcox Corporation Income Statement For the Year Ended December 31, 20XX Net sales $2,870 Cost of goods sold 1,985 Gross profit $ 885 Operating expenses 620 Operating profit $ 265 Interest expense 40 Earnings before taxes $ 225 Income tax expense 80 Net profit $ 145 Wilcox Corporation Balance Sheet December 31, 20XX Assets Liabilities and stockholders' equity Current assets Current liabilities Cash $ 25 Accounts payable $ 85 Short-term investments 15 Accrued liabilities 45 Accounts receivable 70 Total current liabilities 130 Inventory 150 Long-term debt 240 Total current assets 260 Total liabilities 370 Long-term assets Stockholders' equity Net PPE 390 Common stock and PIC 80 Goodwill 210 Retained earnings 410 Total stockholders' equity 490 Total assets $860 Total liabilities and equity $860 WilcoxCorporation Statement of Cash Flow Information For the Year Ended December 31, 20XX Cash from operating activities $150 Investing activities: Capital expenditures $ 60 Acquisitions $ 10 Financing activities: Proceeds from long-term borrowing $ 50 Payments on long-term borrowing $ 25 Payments of cash dividends $ 20 Cash paid for interest $ 10 Cash paid for income taxes $ 75 Wilcox’s average collection period is:

Answer 1

Wilcox’s average collection period is 9 days.

Step-by-step explanation:

The average collection period can be described as how long it takes a company to get paid by the amount of money its clients are owing it in terms of accounts receivable (AR).

Average collection period can be calculated using the following formula:

ACP = (Accounts receivable / Net sales) * 365 days .............. (1)

Where, for this question;

ACP = Average collection period = ?

Accounts receivable = $70

Net sales = $2,870

Substituting the values into equation (1), we have:

ACP = ($70 / $2,870) * 365 days

ACP = 0.024390243902439 * 365 days

ACP = 8.90 days, or approximately 9 days

Therefore, Wilcox’s average collection period is 9 days.