Question

ALei Industries has credit sales of $151 million a year. ​ ALei's management reviewed its credit...

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 of 40 ​days?

Homework Answers

Answer #1
Req a:
Net credit sales in millions 151
Average collection period 40 days
Average collection period = 365 / Net credit sales * Average Accounts recievable
40     = 365 / 151000000 * Average Accounts receivable
Average Accounts receivable = 16547945.2
Req b:
when Average collection period is 50 days, the Average Accounts receivable is as under:
Average Accounts receivable = 50*151000000/365 = 20684931.5
Reduction in Accounts receivable required = 20684931 - 16547945 = $ 4136986
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
ALei Industries has credit sales of $143 million a year. ? ALei's management reviewed its credit...
ALei Industries has credit sales of $143 million a year. ? ALei's management reviewed its credit policy and decided that it wants to maintain an average collection period of 45 days. a.What is the maximum level of accounts receivable that ALei can carry and have a 45?-day average collection? period? b.If? ALei's current accounts receivable collection period is 55 ?days, how much would it have to reduce its level of accounts receivable in order to achieve its goal of 45...
ALei Industries has credit sales of $ 153 million a year. ​ ALei's management reviewed its...
ALei Industries has credit sales of $ 153 million a year. ​ ALei's management reviewed its credit policy and decided that it wants to maintain an average collection period of 45 days. a.  What is the maximum level of accounts receivable that ALei can carry and have a 45​-day average collection​ period? b.  If​ ALei's current accounts receivable collection period is 55 ​days, how much would it have to reduce its level of accounts receivable in order to achieve its...
?(Efficiency analysis) ALei Industries has credit sales of $ 146 million a year. ? ALei's management...
?(Efficiency analysis) ALei Industries has credit sales of $ 146 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 60 ?days, how much would it have to reduce its level of accounts receivable in order to...
ALei Industries has credit sales of $140 million a year. ALei’s management reveiwed its credit policy...
ALei Industries has credit sales of $140 million a year. ALei’s management reveiwed its credit policy and decided that it wants to maintain an average collection period of 365 days. A. What is the maximum level of accounts receivable that ALei can carry and have a 35-day average collection period? B. If ALei’s current accounts receivable collection period is 60 days, how much would it have to reduce its level of accounts receivable in order to achieve its goal of...
Lei Industries has credit sales of $143 million a year. ​ A Lei's management reviewed its...
Lei Industries has credit sales of $143 million a year. ​ A Lei's management reviewed its credit policy and decided that it wants to maintain an average collection period of 45 days. a.  What is the maximum level of accounts receivable that A Lei can carry and have a 45​-day average collection​ period? b.  If​ A Lei's current accounts receivable collection period is 55 ​days, how much would it have to reduce its level of accounts receivable in order to...
Ingram Inc. carries an average inventory of $1,125,000. Its annual sales are $15 million, its cost...
Ingram Inc. carries an average inventory of $1,125,000. Its annual sales are $15 million, its cost of goods sold is 75% of annual sales, and its average collection period is twice as long as its inventory conversion period. The firm buys on terms of net 30 days, and it pays on time. Its new CFO wants to decrease the cash conversion cycle by 10 days, based on a 365-day year. He believes he can reduce the average inventory to $970,890...
In 2020, Nash Company has net credit sales of $1,030,000 for the year. It had a...
In 2020, Nash Company has net credit sales of $1,030,000 for the year. It had a beginning accounts receivable (net) balance of $100,000 and an ending accounts receivable (net) balance of $106,000. Compute Nash Company’s accounts receivable turnover. (Round answer to 1 decimal place, e.g. 2.5.) Accounts receivable turnover times       Compute Nash Company’s average collection period in days. (Round answer to 1 decimal place, e.g. 2.5. Use 365 days for calculations.) Average collection period days
A Corp. had total sales of $1,000,000 in 2018 (80 % of its sales are credit)....
A Corp. had total sales of $1,000,000 in 2018 (80 % of its sales are credit). The company's gross profit margin is 20%, its ending inventory is $100,000, and its accounts receivable balance is $60,000. What additional amount of cash could the firm have generated if it had increased its inventory turnover ratio to 10.0 and reduced its average collection period to 22.375 days. With the same level of sales?
A firm currently has annual credit sales of $912,500 for which the average collection period is...
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.
Accounts receivable Effective credit management involves establishing credit standards for extending credit to customers, determining the...
Accounts receivable Effective credit management involves establishing credit standards for extending credit to customers, determining the company’s terms of credit, and setting up procedures for invoicing and collecting past-due accounts. The following statement refers to a credit management policy. Select the best term to complete the sentence. The conditions of the credit sale, including cash discounts and due dates, are indicated by the company’s credit standards   . Consider the case of Mammoth Pictures Inc.: Mammoth Pictures Inc.’s CFO has decided...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT