Question

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 to take a closer look at the company’s credit policy. Mammoth Pictures Inc. has annual sales of $384.4 million, and it currently has an accounts receivable balance of $45.9 million. The first step in analyzing the firm’s credit policy is to determine its days sales outstanding (DSO).

Based on this information, Mammoth Pictures Inc.’s DSO is43.6 days   . (Note: Use 365 days as the length of a year in all calculations. Do not round intermediate calculations. Round your answer to one decimal place.)

1. The average DSO for Mammoth Pictures Inc.’s industry is 53.4 days. Assuming that its sales stayed the same, what would be Mammoth Pictures Inc.’s receivables balance if it maintained the industry average DSO?     (Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar.)

Mammoth Pictures Inc.’s CFO thinks that the company has not done a very good job of enforcing its credit policy. The CFO believes that if the company were to better enforce its credit policy, it would reduce its DSO to 30 days; however, this will cause Mammoth Pictures Inc. to lose 5% of its sales revenue. What would Mammoth Pictures Inc.’s expected accounts receivables balance be if it decides to tighten its credit policy? (Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar.)

$28,514,055

$36,017,754

$27,013,316

$30,014,795

Homework Answers

Answer #1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

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
8. Accounts receivable Effective credit management involves establishing credit standards for extending credit to customers, determining...
8. 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 minimum financial strength a customer must have to be granted credit is indicated by the company’s     . Consider the case of Stowe-Arts Holdings Co.: Stowe-Arts Holdings Co.’s CFO has decided to...
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 minimum financial strength a customer must have to be granted credit is indicated by the company’s terms, collection, or credit? Consider the case of Tun Ash Inc.: Tun Ash Inc. has a...
Effective credit management involves establishing credit standards for extending credit to customers, determining the company’s credit...
Effective credit management involves establishing credit standards for extending credit to customers, determining the company’s credit terms, 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 minimum financial strength a customer must have to be granted credit is indicated by the company’s_______ Consider the case of Stowe-Arts Holdings Co.: Stowe-Arts Holdings Co. has a very attractive credit policy, and none of...
10.  Problem 4.20 (DSO and Accounts Receivable) eBook Problem Walk-Through Ingraham Inc. currently has $645,000 in accounts...
10.  Problem 4.20 (DSO and Accounts Receivable) eBook Problem Walk-Through Ingraham Inc. currently has $645,000 in accounts receivable, and its days sales outstanding (DSO) is 65 days. It wants to reduce its DSO to 30 days by pressuring more of its customers to pay their bills on time. If this policy is adopted, the company's average sales will fall by 10%. What will be the level of accounts receivable following the change? Assume a 365-day year. Do not round intermediate calculations....
Ingraham Inc. currently has $915,000 in accounts receivable, and its days sales outstanding (DSO) is 45...
Ingraham Inc. currently has $915,000 in accounts receivable, and its days sales outstanding (DSO) is 45 days. It wants to reduce its DSO to 20 days by pressuring more of its customers to pay their bills on time. If this policy is adopted, the company's average sales will fall by 25%. What will be the level of accounts receivable following the change? Assume a 365-day year. Do not round intermediate calculations. Round your answer to the nearest cent.
Ingraham Inc. currently has $425,000 in accounts receivable, and its days sales outstanding (DSO) is 65...
Ingraham Inc. currently has $425,000 in accounts receivable, and its days sales outstanding (DSO) is 65 days. It wants to reduce its DSO to 30 days by pressuring more of its customers to pay their bills on time. If this policy is adopted, the company's average sales will fall by 15%. What will be the level of accounts receivable following the change? Assume a 365-day year. Do not round intermediate calculations. Round your answer to the nearest cent.
Atlantic Northern Inc. currently has $620,000 in accounts receivable and generated $4,350,000 in sales (all on...
Atlantic Northern Inc. currently has $620,000 in accounts receivable and generated $4,350,000 in sales (all on credit) during the year that just ended. The firm’s days sales outstanding (DSO) is_______days. Use 365 days as the length of a year in all calculations. A.) 52.02 C.) 39.02 B.) 49.42 D.) 57.22 Atlantic Northern Inc.’s CFO is unhappy with its DSO and wants to improve collections next year. Sales are expected to grow by 13% next year, and the CFO wants to...
A company has net income of $195,000, a profit margin of 8.3 percent, and an accounts...
A company has net income of $195,000, a profit margin of 8.3 percent, and an accounts receivable balance of $134,370. Assuming 70 percent of sales are on credit, what is the company’s days’ sales in receivables? (Use 365 days a year. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)    
A company has net income of $188,000, a profit margin of 7.1 percent, and an accounts...
A company has net income of $188,000, a profit margin of 7.1 percent, and an accounts receivable balance of $127,370. Assuming 70 percent of sales are on credit, what is the company’s days’ sales in receivables? (Use 365 days a year. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Potter Manufacturing currently has $580,000 in accounts receivable and generated $4,550,000 in sales during the year...
Potter Manufacturing currently has $580,000 in accounts receivable and generated $4,550,000 in sales during the year just ended. Potter's CFO is unhappy with the DSO and wants to improve collections next year. Sales are expected to grow by 14% next year and the CFO wants to lower the DSO to the industry average of 42 days. If successful, by how much would the company's AFN be reduced? ?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT