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16 December, 16:53

Greene Sisters has a DSO of 20 days. The company's average daily sales are $20,000. What is the level of its accounts receivable? Assume there are 365 days in a year. Ehrhardt, Michael C ... Corporate Finance: A Focused Approach (MindTap Course List) (p. 129). Cengage Learning. Kindle Edition.

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  1. 16 December, 17:13
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    Answer: $400,000

    Explanation:

    Days Sales Outstanding is used by a firm to estimate the amount of its accounts receivable.

    DSO (Days Sales Outstanding) = Accounts Receivables/Average Sales per day

    Where DSO = 20 days

    Average sales per day = $20,000

    Accounts receivable (AR) = ?

    20=AR/20000

    Cross multiply to make AR the subject of the formula

    Accounts Receivables = 20 x 20000

    AR=$400,000.
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