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27 February, 22:13

Keswick Supply Company wants to set up a division that provides copy and fax services to businesses. Customers will be given 20 days to pay for such services. The annual revenue of the division is estimated to be $25,000. Assuming that the customers take the full 20 days to pay, what is the incremental cash flow associated with accounts receivable?

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  1. 27 February, 22:34
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    Incremental cash flow = $1,369.863~ $1,370

    Explanation:

    In accrual accounting, accounts receivable gives a measure of revenue that a business has earned.

    Given the annual revenue as $25,000. To get the daily revenue

    Daily revenue = Annual revenue / 365

    Daily revenue = 25,000/365

    Daily revenue = $68.493

    Customers are expected to pay within 20 days, so for every 20 days

    Incremental cash flow = 20 days * 68.493

    Incremental cash flow = $1,369.863~ $1,370
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