Canelle SA reported 2007 revenue of EUR 137 million. Its accounts receivable balance began the year at 11 million EUR and ended the year at 16 million EUR. At year end 2 million EUR had been securitized. Canelle cash collection from CUSTOMERS in 2007 were closest to :
A. 130 million. B.132 million C. 134 million
Why answer is A 130 million? I think we should not count 2 million securitized amount because the question asked
“cash collection from CUSTOMERS”. I think, 2 million securitized should not be considered. This is not collected from customers.
The fact that it specified “from customers” is precisely why you have to subtract the 2 million. The revenue of 137 million includes the 2 million collected from selling receivables to not customers, but a third party buyer of receivables. Thus, 2 million has to be subtracted from total revenue of 137mm along with the 5 million dollar increase in accounts receivables.
Think about it like this, if they hadn’t securitized the 2 million then A/R at year end would be 18mm, so the change in A/R would be 7million. So 137mm - 7mm = 130mm collected from customers.