solution

Balance Sheet

Assets		Liabilities
Current Assets		Current Liabilities
Cash	50	Accounts payable	42
Accounts receivable	22	Notes payable/short-term debt	7
Inventories	17
Total current assets	89	Total current liabilities	49
Long-Term Assets		Long-Term Liabilities
Net property, plant, and equipment	121	Long-term debt	128
Total long-term assets	121	Total long-term liabilities	128
		Total Liabilities	177
		Shareholders’ Equity	33
Total Assets	210	Total Liabilities and Shareholders’ Equity	210

Income Statement

Total sales	312
Cost of sales	-210
Gross Profit	102
Selling, general, and administrative expenses	-34
Research and development	-10
Depreciation and amortisation	-5
Operating Income	53
Other income	–
Earnings before interest and taxes (EBIT)	53
Interest income (expense)	-20
Pretax income	33
Taxes	-8
Net Income	25

The balance sheet and income statement of a particular firm are shown above. What does the account receivable days ratio tell you about this company?

Select one:

A. It takes on average about 6 weeks to collect payment from its customers.

B. It takes on average about 4 weeks to collect payment from its customers.

C. It takes on average about 11 weeks to collect payment from its customers.

D. It takes on average about 7 weeks to collect payment from its customers.