A Company Reported Net Sales for Year 1 of $285,000

question 7

Essay

A company reported net sales for Year 1 of $285,000 and $575,000 for Year 2. The year-end balances of accounts receivable were $49,000 for Year 1 and $85,000 for Year 2. Calculate the days' sales uncollected at the end of each year for this company and describe any changes in the apparent liquidity of the company's receivables.

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Definitions:

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance.

International Trade

The exchange of goods and services between countries.

Current Account

An account of a country’s exports and imports of goods, services, and income.

Balance of Trade

The difference between the monetary value of a nation's exports and imports over a certain period. A positive balance means more goods were exported than imported, and vice versa.