The AFN equation and the financial statement$-$forecasting approach both assume that assets grow at relatively the same rate as sales. However, the relationship between assets and sales is often a little more difficult than that. In particular, some firms use regression analysis to predict the required assets needed to support a given level of sales.

General Services Corp. has used its historical sales and asset data to estimate the following regression equations:

$\backslash$table$[[$Accounts Receivable,$=-$$$85,230+0\mathrm{.}265($Sales$)],[$Inventories$,=$$$9,900+0\mathrm{.}223($Sales$)]]$

General Services Corp. currintly has sales of $$922,000,$ but it expects sales to grow by $20\%$ over the next year. Use the regression models to calculate General Services Corp.$\text{'}$s forecasted values for accounts receivable and inventories needed to support next year's sales.

Forecasted Values for Next Year

Accounts receivable

Inventories

Based on the next year's accounts receivable and inventory levels predicted by General Services Corp.$\text{'}$s regression equations, the firm's DSO for next year is expected to be $.$ Use $365$ days as the length of a year in all calculations.N