Analysis of Accounts Receivable Management and Its Impact on Financial Performance1. Using the provided financial forecast data, calculate the following:a.Projected Days Sales Outstanding (DSO):Given that net credit sales are $1,400,000, and the breakdown of sales is 20% in 10 days,60% in 30 days, and 20% in 60 days, calculate theprojected days sales outstanding.b.Projected Average Daily Sales:Given that net credit sales amount to $1,400,000, calculate theprojected average dailysales.c.Projected Average Receivable Level:Using the projected days sales outstanding and the calculated average daily sales,determine theprojected average receivable level.d.Investment in Accounts Receivables:Assuming that the variable cost is 60% of net credit sales, calculate theinvestment inaccounts receivablesbased on the A/R turnover.e.Projected Annual Cost of Carrying Receivables:If the annual interest rate on receivables is 9%, calculate theprojected annual cost ofcarrying the receivables.Based on the forecastsa.Projected days sales outstanding= accounts receivable/ net credit sales* 365Net credit sales= 28000*$50= $1400000Projected days sales outstanding= 10*20%+ 30*60%+ 60*20%= 32 daysb.Projected average daily sales= $1400000/365= $3836c.Projected average receivable level= projected days sales outstanding * net creditsales/ 365= 32*$3835.61= $122740d.Investment in accounts receivables=total variable cost/ A/R turnover=$1400000*60%/ 365/32= $73644Balanceof accounts receivable= $122740Balance of notes payables= $73644Retained earnings= 122740-$73644= $49096e.Projected annual cost of carrying the receivables= $73644*9%= $66282.What are the various factors that affect the size of receivables and the dollar cost ofcarrying receivables? Discuss how credit sales, credit policies, terms of credit, expansionPreview Mode
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