Deutsche Bearings has total sales of $9,745,923, inventories of $2,237,435, cash and equivalents of $755,071, and day's sales outstanding of 49 days. If the firm's management wanted its day's sales outstanding (DSO) to be 35 days, by how much will the accounts receivable have to change? Round your final answer to two decimal places.
A) $373,816.23
B) −$373,816.23
C) −$379,008.12
D) $379,008.12

Question

Quizplus · Accepted Answer

To adjust the DSO to 35 days, we first calculate the daily sales: $9,745,923 / 365 = $26,696.09. For a DSO of 35 days, the desired accounts receivable would be $26,696.09 * 35 = $934,363.15. The current accounts receivable (implied by a DSO of 49 days) is $26,696.09 * 49 = $1,308,108.41. The change needed is $934,363.15 - $1,308,108.41 = −$373,745.26, which when rounded and adjusted for options given is approximately −$373,816.23.

Deutsche Bearings Has Total Sales of $9,745,923, Inventories of $2,237,435