Lowell Inc. gives 30 days credit to customers. On an average, how many extra days are customers taking to pay?

Please use the Year 1 information in the sheet attached here.

(Days Sales Outstanding' ratio = AR/Daily sales)

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INCOME STATEMENT Year 0 Year 1 Revenue 4,700 5,000 Cost of goods sold 2,776 2,943 Gross profit 1,924 2,057 Depreciation 165 197 Other expenses 1,183 1,410 Operating income (EBIT) 576 450 Interest Expense 303 110 Income before taxes 273 340 Provision for income taxes @ 21% 57 71 Net income 216 269 BALANCE SHEEET Year 0 Year 1 ASSETS Cash and marketable securities Short-Term Investments Receivables Inventories LIABILITIES AND EQUITY Notes Payable Accounts payable Accruals 210 191 568 749 563 736 249 278 Total Current Assets 1,590 1,954 Net Fixed Assets 3,100 3,150 Total assets 4,690 5,104 250 363 115 177 451 591 Total current liabilities 816 1,131 Long-term debt 459 414 Total liabilities 1,275 1,545 Common stock and additional paid-in capital 615 709 Retained earnings 2,800 2,850 Total stockholders' equity 3,415 3,559 Total liabilities and stockholders' equity 4,690 5,104 Diluted no. of shares 100.00 100.00 Stock price 76 114 Weighted Avg Cost of Capital (WACC) 7.0% 7.0% Dividend & repurchases per share $ 1.66 $ 2.19 INCOME STATEMENT Year 0 Year 1 Revenue 4,700 5,000 Cost of goods sold 2,776 2,943 Gross profit 1,924 2,057 Depreciation 165 197 Other expenses 1,183 1,410 Operating income (EBIT) 576 450 Interest Expense 303 110 Income before taxes 273 340 Provision for income taxes @ 21% 57 71 Net income 216 269 BALANCE SHEEET Year 0 Year 1 ASSETS Cash and marketable securities Short-Term Investments Receivables Inventories LIABILITIES AND EQUITY Notes Payable Accounts payable Accruals 210 191 568 749 563 736 249 278 Total Current Assets 1,590 1,954 Net Fixed Assets 3,100 3,150 Total assets 4,690 5,104 250 363 115 177 451 591 Total current liabilities 816 1,131 Long-term debt 459 414 Total liabilities 1,275 1,545 Common stock and additional paid-in capital 615 709 Retained earnings 2,800 2,850 Total stockholders' equity 3,415 3,559 Total liabilities and stockholders' equity 4,690 5,104 Diluted no. of shares 100.00 100.00 Stock price 76 114 Weighted Avg Cost of Capital (WACC) 7.0% 7.0% Dividend & repurchases per share $ 1.66 $ 2.19

Answer rating: 100% (QA)

Answer To calculate the Days Sales Outstanding DSO ratio we can use the formula DSO Accounts ... View the full answer