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Management of Accounts Receivable and Inventories

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Miranda Tool Company sells to retail hardware stores on credit terms of "net". Annual credit sales are $18 million and are spread evenly throughout the year. The company's variable cost ratio is 0.70, and its accounts receivable average $1.9 million. Using this information, determine the following for the company:

a. Average daily credit sales
b. Average collection period
c. Average investment in receivables

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Annual Credit Sales = $18m
Variable Cost = 70% = 18*70% = $12.6m
Avg AR = ...

Solution Summary

The solution computes average daily credit sales, average collection period and average investment in receivables.