A firm has total assets of $500 million, including its accounts receivable, which is worth $120 million. The annual sales of the firm is $650 million. The days sales outstanding (DSO) ratio of the firm is:

Question

Business

Mariam Lowe

27 August, 03:27

A firm has total assets of $500 million, including its accounts receivable, which is worth $120 million. The annual sales of the firm is $650 million. The days sales outstanding (DSO) ratio of the firm is:

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Answers (1)

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Reed Boyd · Answer 1

The days sales outstanding (DSO) ratio of the firm is 67 days.

Explanation:

In this question we use the formula of days sales outstanding which is shown below:

Day sale outstanding = Accounts receivable : annual sales * total number of days in a year

where,

accounts receivable is $120 million

Annual sale is $650 million

And, we assume 365 days in a year

Now, put these values on the above equation.

So, the Days sales outstanding would be equal to

= $120 million : $650 million * 365 days

= 0.184615 * 365 days

= 67 days

Hence, the days sales outstanding (DSO) ratio of the firm is 67 days.