The South African Diamond Corporation had a gross profit margin (gross profits sales) of 30 percent
Question:
The South African Diamond Corporation had a gross profit margin (gross profits ÷ sales) of 30 percent and sales of \($10\) million last year. Seventy-eight percent of the firm’s sales are on credit and the remainder are cash sales.
The company’s current assets equal \($1.7\) million, its current liabilities equal \($450,000,\) and it has \($120,000\) in cash plus marketable securities.
a. If the company’s accounts receivable are \($545,700,\) what is its average collection period?
b. If the company reduces its days in receivable (average collection period) to 18 days, what will be its new level of accounts receivable?
c. The company’s inventory turnover is 10 times. What is the level of its inventories?
Step by Step Answer:
Foundations Of Finance
ISBN: 9781292318738
10th Global Edition
Authors: Arthur Keown, John Martin, J. Petty