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13 October, 16:02

The Monster Truck operates several specialty vehicles that provide hot food and beverages for firms that have workers employed in outlying regions. The company has annual sales of $627,200. Cost of goods sold average 38 percent of sales and the profit margin is 5.1 percent. The average accounts receivable balance is $35,300. On average, how long does it take the company to collect payment for its services

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  1. 13 October, 19:06
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    The answer is 20.55 days

    Explanation:

    Solution

    Given that:

    Annual sales = $627,200

    Average accounts receivable = $35,300

    Now

    The accounts turnover ratio (receivable) = Sales/Average accounts receivable

    Accounts receivable turnover ratio = $627,200/$35.300

    =17.76 times

    Thus

    Number of days payment receives = 365 / Accounts receivable turnover ratio = 365 days/17.76 times

    =20.55 days

    Therefore The company takes 20.55 days to get payment for its services
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