Question

A firm has $42,900 in receivables and $211,800 in total assets. The total asset turnover rate is 1.45 and the profit margin is 4.2 percent. How long on average does it take the firm to collect its receivables?

Answer 1

The answer is 50.99days

Step-by-step explanation:

We need to find net sales first because we need it to calculate our number of receivable days.

Asset turnover rate =Net sales/total asset

Asset turnover = 1.45

Total asset = $211,800

Net sales = y

1.45=y/$211,800

y = 1.45 x $211,800

y(net sales) = $307,110

Therefore, Number of receivable days = account receivables/sales(revenue)

=42,900/307,110 x365days

=50.99 days