Question: A company is preparing a loan application to acquire a major piece of production equipment. Included in the loan application package is a one-year projection
A company is preparing a loan application to acquire a major piece of production equipment. Included in the loan application package is a one-year projection of financial results that includes the effect of the new equipment acquisition. Currently, the company's annual sales are $4,000,000, and the corresponding days sales outstanding (DSO) is 40 days. The projection is that the new equipment will increase annual sales by 20%. Also, management wants the projection to show a reduction in the DSO to 30 days. Assuming a 365-day year, what should be the approximate percentage change in receivables shown in the projection? A. Decrease receivables by 10%. B. Decrease receivables by 15%. C. Increase receivables by 25%. D. Increase receivables by 30%
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