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Chapter 9

1.3 Accounts receivable calculations
Cost of financing receivables

Finance cost = Receivable balance × Interest (overdraft) rate
Receivable days
Receivable balance = Sales × –––––––––––––––––
365

Question 1

Receivables financing cost

ABC Co has sales of $50m for the previous year. Receivables days are 57and
receivables are financed using an overdraft costing 6% per annum.

Calculate the receivables balance and the annual financing cost for receivables.

Receivables balance = 57 × $50m/365 = $7,808,219

Financing cost = $7,808,219 × 6% = $468,493

Illustrations and further practice

Now try TYU question 1 from Chapter 9

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