Calculate required external funding

Reference no: EM1365111

Cannon Company has enjoyed a rapid increase in sales in recent years following a decision to sell on credit. However, the firm has noticed a recent increase in its collection period. Last year, total sales were $1 million and $250,000 of those sales was on credit. During the year, the account receivable averaged $41,096. It is expected that sales will increase in the forthcoming year by 50 percent and while credit sales would countinue to be the same proportion of total sales, it is expected that the days sales outstanding will also increase by 50 percent (assume a 365 day year). If the resulting increase in accounts receivable must be financed by external funds, how much external funding will Cannon need?

a. $41,664
b. $51,370
c. $47,359
d. $106,471
e. $93,750

Reference no: EM1365111

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