Day sales in inventoy-pressing customers to pay bills faster

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Reference no: EM131059897

Ruth Company currently has $2,000,000 in accounts receivable and $1,000,000 in inventories. Due to advancement in production technology, its day’s sales in inventory (DSI) is going to decrease from 45 to 30 over the following year. In turn, Ruth co. plans to reduce its day’s sales in receivable (DSR) from current 60 days to the industry average of 30 days by pressing its customers to pay their bills faster. Assume a 360-day year. The company's CFO estimates that if this policy is adopted the company's average sales will rise by 80% percent. Assume that COGS is all variable and as a percentage of sales remains stable over time. What expected change in net working capital, if only receivables and inventories are expected to change over the coming year?

Reference no: EM131059897

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Day sales in inventoy-pressing customers to pay bills faster : Ruth Company currently has $2,000,000 in accounts receivable and $1,000,000 in inventories. Due to advancement in production technology, its day’s sales in inventory (DSI) is going to decrease from 45 to 30 over the following year. In turn, Ruth co. ..

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