The Brenmar Sales Company had a gross profit margin (gross profits 4 sales) of 30 percent and

Question:

The Brenmar Sales Company had a gross profit margin (gross profits 4 sales) of 30 percent and sales of $9 million last year. Seventy-five percent of the firm’s sales are on credit, and the remainder is cash sales. Brenmar’s current assets equal $1.5 million, its current liabilities equal $300,000, and it has $100,000 in cash plus marketable securities.

a. If Brenmar’s accounts receivable equal $562,500, what is its average collection period?

b. If Brenmar reduces its average collection period to 20 days, what will be its new level of accounts receivable?

c. Brenmar’s inventory turnover ratio is 9 times. What is the level of Brenmar’s inventories?

Inventory Turnover Ratio
Inventory Turnover RatioThe inventory turnover ratio is a ratio of cost of goods sold to its average inventory. It is measured in times with respect to the cost of goods sold in a year normally. Inventory Turnover Ratio FormulaWhere,... Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...