Last year Brenmar Sales Company has a gross profit margin of 30% and sales of $9million. 75% of the company's sales on credit and the remainder 25% is in cash sales. Brenmar's current asset equals $1.5million, $300k in current liabilities, and $100k in cash plus marketable securities.
a. I need to determine what the average collections period is.
b. If the company reduces its average collection period to 20 days, what will be its new level of accounts receivable?
c. Brenmar's inventory turnover ratio is 9 times. What is the level of Brenmar's inventories?