Chapter 11
Financial Statement Analysis
574
AP-6B (
5
)
At the end of 2016, accounts receivable for Genuine Interiors amounted to $210,000. At the
beginning of the year, it was $200,000. Net credit sales for the year amounted to $900,000 and
net income was calculated to be $205,000.
Determine the days sales outstanding ratio and the accounts receivable turnover ratio.
Analysis
Generally, a lower DSO is desirable, since it means collections are happening faster for the
company. Is there any drawback to getting the DSO extremely low, such as to only two or
three days?
