The annual accounts receivable is 3,000; the annual sales 40,000, and the gross profit margin is 40%. The receivable days estimated from the data above is?

Answer 1

Annual accounts receivable = 3,000

Annual sales = 40,000

Accounts receivable days = (Acct Rec / Total Rev) x 365 days

Accounts receivable days = (3,000/ 40,000) x 365

Accounts receivable days = 27.375 days or 27 days

Answer 2

Start with the Accounts Receivable Turnover Ratio:

Net Credit Sales/Accounts Receivable

40,000 (40%)/3,000

16,000/3,000 = 5.333 times/year

To convert it to days:

365/5.333 = 68 days