Question

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?

Answer 1

Answer:

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