In CFAi’s Volume 4, Reading 46, p. 113, exhibit 12, how did the author calculate the collection days in Panel B for each time category of receivables?
Do I hear crickets chirping?
gdiddy I am a 2007 L1 candidate, and there has been a whole slew of changes between 2007 and 2008 curriculum. The chapter 46 on Working Capital Management was not a part of 2007 curriculum. If you would care to post the exhibit, I could try to see how the #s were derived. You could send them to me : cpkrish@yahoo.com. instead of posting it on the forum. Regards CP
I thought I’d bump this thread as I really want to know how the collection days have been calculated in the exhibit. Here are some portions of the exhibit: …MARCH… Aging Group…Collection Days…Weight…Weighted Days Current (1-30 days)…20…55.4%…11.1… 31-60 days…48…24.6%…11.8… 61-90 days…80…9.2%…7.4… 91-120 days…110…6.2%…6.8… 121+ days…130…4.6%…6.0… How did the authors calculate collection days? More… Month…Jan…Feb…Mar…Apr Sales…530…450…560…680 Total A/R…600…560…650…720 Current (1-30 days)…330…290…360…280 1-30 days past due…90…120…160…250 31-60…80…60…60…110 61-90…70…50…40…50 >90…30…40…30…30 I know how the weights are calculated, as well as the weighted days. But how do we get collections days for each aging group?
I think these #s are given and part of the question itself? Or else they are calculated like some credit terms like Net 10 or Net 20 (credit payment terms) to that effect. This is what I think. CP
in Volume 4, Reading 46, p. 113, exhibit 12 footnote a, the collection days is average days for collecting receivables in each each grouping. here’s what I guess: in aging group current(1~30 days), there are total 30 collection receibables, they ranges from 1 to 30 days, i.e. 5 of 30 is 2 days, 1 of 30 is 3 days, etc… calculate their arithmetic mean, it’s the collection days for this group.