If the industry days sales outstanding is 65 days and a firm with sales of $1,034,550 has receivables of $268,700, how much in interest expense could the firm save if the receivables turn over as quickly as the industry average and the cost of carrying the receivables is 9%?
What will be an ideal response?
Desired receivables based on the industry average:?65 = X/($1,034,550/365)?X = $184,235?Reduction in receivables: $268,700 - $184,235 = $84,465?Reduction in interest expense: 0.09 x $84,465 = $7,602
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