Days sales outstanding and average amount of receivables
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Given the following: sells terms are 3/10, net 30, and total sales for the year is $912,500, and 40% of customers pay on the 10th and the other 60% paid 40 days after purchase. What is the days sales outstanding? What is the average amount of receivables? And what would happen if the non-discount customers (60%) paid on the 30th day instead of 40 days? Show step by step please.
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Solution Summary
The days sales outstanding and the average amount of receivables have been calculated.
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Total Sales for the year = $912,500
Number of days in a year = 365
Therefore, daily sales = $2,500 = 912500 / 365
When non discount customers paid on 40th day:
40% of sales is paid after 10 days
60% of sales is paid after 40 days
Therefore, days sales outstanding = 28 days = 0.4 x 10 + 0.6 x 40
Daily sales = $2,500
Therefore, average amount of receivables = $70,000 =28 x ...
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