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Calculating Declining Receivables Example

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Data on Shick Inc. for 2008 are shown below, along with the days sales outstanding of the firms against which it benchmarks. The firm's new CFO believes that the company could reduce its receivables enough to reduce its DSO to the benchmarks' average. If this were done, by how much would receivables decline? Use a 365-day year.

Sales $94,000
Accounts receivable $16,000
Days Sales Outstanding (DSO) 62.13
Benchmarks' Days Sales Outstanding (DSO) 20.00

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Solution Summary

Solution explains how to calculate the amount in which receivables would decline.

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