Question

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 ?days?

a.What is the maximum level of accounts receivable that ALei can carry and have a 45?-day average collection? period? The maximum level of accounts receivable will be ?$___ million.???(Round to one decimal? place.)

Answer 1

a)

Maximum Level of acounts receivable = 143000000 *45/365

Maximum Level of acounts receivable = $ 17630136.986301

b)

Current Account Receivable =  143000000 *55/365

Current Account Receivable = $ 21547945.205479

It would have to reduce its level of accounts receivable to achieve 40 days = Current Account Receivable -proposed Account receivable

It would have to reduce its level of accounts receivable to achieve 40 days = 21547945.205479 - 17630136.986301

It would have to reduce its level of accounts receivable to achieve 40 days = $ 3,917,808.219178