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Worldwide Rugs is a rug importer located in the United States that resells its import products to local retailers
Worldwide Rugs is a rug importer located in the United States that resells its import products to local retailers. Last year Worldwide Rugs imported $2.5 million worth of rugs from around the world, all of which were paid for prior to shipping. On receipt of the rugs, the importer immediately resold them to local retailers for $3 million. To allow its retail clients time to resell the rugs, Worldwide Rugs sells to retailers on credit. Prior to the end of its business year, Worldwide Rugs collected 85% of its outstanding accounts receivable.
What is the financial cash flow that Worldwide Rugs generated for the year?
Answer:
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Abdul-Rahim Taysir
Expert Solution
| Worldwide Rugs: | |
| Sales - sold on credit: | $3,000,000 |
| 85% of Sales collected (accounts receivable) - Cash flow generated for the year: |
=3000000*85% = $2,550,000 |
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