Question

Faldo Corp sells on terms that allow customers 45 days to pay for merchandise. Its sales last year were exist325,000 and its year end receivables were exist60,000. If its DSO is less than the 45-day credit period, then customers are paying on time. Otherwise, they are paying late. By how much are customers paying early or late? Base you answer on this equation. DSO-Credit Period = Days early or late, and use a 365-day year when calculating the DSO. A positive answer indicates late payments while a negative answer indicates early payments. Assume all sales to be on credit. Do not round your intermediate calculations. a. 17.46 b. 22.38 c. 17.01 d. 26.86 e. 18.13

Answer 1

Answer:

By how much are customers paying early or late?

• B) 22.38

Explanation:

Days sales outstanding (DSO) represents the average number of many days it takes a business to collect its accounts receivables.

DSO = (accounts receivables / total credit sales) x 365 days

DSO = ($60,000 / $325,000) x 365 days = 67.38 days

customers are paying late by 67.38 days - 45 days = 22.38 days