Question about Trade Credit and Receivables
Not what you're looking for?
Trade Credit and Receivables. A firm offers terms of 2/15, net 30. Currently, two-thirds of all customers take advantage of the trade discount; the remainder pay bills at the due date.
a. What will be the firm's typical value for its accounts receivable period?
b. What is the average investment in accounts receivable if annual sales are $20 million?
c. What would likely happen to the firm's accounts receivable period if it changed its terms to 3/15, net 30?
Problem is attached as a Word Doc. You Must show your work and include all Formulas used.
Purchase this Solution
Solution Summary
Solution calculates the firm's typical value for its accounts receivable period and the average investment in accounts receivable.
Solution Preview
a. What will be the firm's typical value for its accounts receivable period?
Currently two-thirds of all customers take advantage of the trade discount. This means that they pay on day 15
Currently one -thirds of all customers do not take advantage of the trade discount. This means that they pay on day 30
Value for Accounts Receivable period:
15 days x 2/3 = 10 days
30 days x 1/3 = 10 days
Total =10 + 10 = 20 days
Answer: 20 days
b. What is the average investment in accounts receivable if annual sales are ...
Purchase this Solution
Free BrainMass Quizzes
Business Ethics Awareness Strategy
This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Social Media: Pinterest
This quiz introduces basic concepts of Pinterest social media
Introduction to Finance
This quiz test introductory finance topics.