Question

Analysts frequently use average collection period to assess the
effectiveness of a company’s credit and collection policies. IF a
company sells its goods on a 2/10, n30 basis, and its average
collection period is 50 days, **(1) should the accounts
receivable manager get a bonus or a pink slip?**

Answer #1

**Solution:**

**Account Receivable
Collection:** Company’s average collection period is 50 days
it means on an average company is getting his money after 50 days
of sales.

Now company is introduced the cash discount policies for the customers. In this discount policy if the customer is paid within 10 days than customer will get the 2% cash discount on his account. This will attract to the our customer for early payments.

IF the customers are paid said goods on the basis of the 2/10 , n 30 that if the customer attract with discount than he can pay within 10 days or in maximum he can pay within 30 days of sale on credit. In both the cases overall collection period is reduced from 50 Days.

Overall collection period is reduced from this policy so account receivable manager will get the bonus from the company because this change will improve the collection of the company

Nexus Enterprises has an inventory conversion period
of 50 days, an average collection period of 35 days and a payables
deferral period of 25 days. assume that cost of goods sold is 80%
of sales.
1 what is the length of the firms cash conversion
cycle?
2 if annual sales are 4380000 dollars and all sales
are on credit what is the firm's investment in accounts
receivable?
3 how many times per year does negus Enterprises turn
over its inventory?

A firm currently has annual credit sales of $912,500 for which
the average collection period is 30 days. If, in response to
allowing the average collection period to increase to 40 days,
sales increased by 10 percent, what would be the additional
investment in accounts receivable?
A. $26,800.
B. $35,000.
C. $26,000.
D. None of the above.

The average of number days taken to collect debts from
credit customers indicates the efficiency of collection. The
shorter the number of days, the greater the efficiency. The average
collection period is obtained by dividing the average accounts
receivable by the daily average credit sales. For Smith & Co.
the average collection period is 28 days and average accounts
receivable is $196000. The company’s daily average credit
is:
2. When the cost of goods sold is divided by the average...

TCBW last year had an average collection period (days sales
outstanding) of 29 days based on accounts receivable of $530,000.
All of the firm's sales are made on credit. The firm expects sales
this year to be the same as last year. However, the company has
begun a new credit policy that should lower the average collection
period to 22 days. If the new average collection period is
attained, what will the firm's accounts receivable balance equal?
(Round your answer...

ALei Industries has credit sales of $151 million a year.
ALei's management reviewed its credit policy and decided that it
wants to maintain an average collection period of 40 days.
a. What is the maximum level of accounts receivable that ALei
can carry and have a 40-day average collection period?
b. If ALei's current accounts receivable collection period is
50 days, how much would it have to reduce its level of accounts
receivable in order to achieve its goal...

Negus Enterprises has an inventory conversion period of 62 days,
an average collection period of 35 days, and a payables deferral
period of 36 days. Assume that cost of goods sold is 80% of sales.
Assume 365 days in year for your calculations.
What is the length of the firm's cash conversion cycle?
days
If Negus' annual sales are $3,705,000 and all sales are on
credit, what is the firm's investment in accounts receivable? Round
your answer to the nearest...

Zane Corporation has an inventory conversion period of 86 days,
an average collection period of 33 days, and a payables deferral
period of 38 days. Assume 365 days in year for your
calculations.
Length of the cash conversion cycle = 81 days
Zane's annual sales are $3,457,635 and all sales are on
credit.
The investment in accounts receivable is $312,608.09
How many times per year does Zane turn over its
inventory? Assume that the cost of goods sold is 75%...

Negus Enterprises has an inventory conversion period of 72 days,
an average collection period of 46 days, and a payables deferral
period of 25 days. Assume that cost of goods sold is 80% of sales.
Assume 365 days in year for your calculations.
A) What is the length of the firm's cash conversion cycle?
B) If Negus's annual sales are $3,523,450 and all sales are on
credit, what is the firm's investment in accounts receivable? Round
your answer to the...

Space Enterprises has an inventory conversion period of 55 days,
an average collection period of 44 days, and a payables deferral
period of 29 days. Assume that cost of goods sold is 80% of sales.
Assume 365 days in year for your calculations. What is the length
of the firm's cash conversion cycle? 62 days If Space's annual
sales are $3,432,450 and all sales are on credit, what is the
firm's investment in accounts receivable? Round your answer to the...

The Newkirk Corporation has annual credit sales of $29 million.
The average collection period is 34 days.
(Enter your answer as directed, but do not
round intermediate calculations.)
Required:
What is the average investment in accounts receivable as shown
on the balance sheet? (Enter your answer
in dollars, not millions of dollars (e.g., 1,234,567). Round your
answer to 2 decimal places (e.g., 32.16).)
Average receivables
$

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 3 minutes ago

asked 3 minutes ago

asked 3 minutes ago

asked 3 minutes ago

asked 4 minutes ago

asked 7 minutes ago

asked 7 minutes ago

asked 9 minutes ago

asked 10 minutes ago

asked 14 minutes ago

asked 15 minutes ago

asked 15 minutes ago