Certified Management Accountant Practice Exam

The calculation for the projected amount of overdue receivables involves determining how much of the sales will remain unpaid beyond their due dates. When using the approach described in the chosen option, the formula effectively captures the relationship between sales, collection periods, and overdue payments.

Starting with the gross sales, multiplying it by the percentage of sales typically received after the due date gives an estimate of the value that may not be collected on time. This is crucial as it reflects a real-world scenario where not all customers pay promptly.

The formula also includes the number of days that are paid in relation to the total days in a year, which allows for a more granular view of cash collection efficiency and timing. By normalizing the overdue amount against the total period of the year, you're able to assess how overdue the receivables are in relation to your sales cycle.

This method is useful for understanding cash flow issues and managing working capital, which is particularly important for maintaining the financial health of an organization. The precision of this calculation comes from its ability to incorporate both sales data and historical payment behaviors, making it a practical tool for financial forecasting and strategy.