FIN-320-05132 Principles of Finance 18EW5 Wendy Franey I Gans 3:13 PM Homework:

Question

FIN-320-05132 Principles of Finance 18EW5 Wendy Franey I Gans 3:13 PM Homework: 4-2 MyFinanceLab Assignment Save Score: 2 of 4 pts 7 of 12 (12 complete) Hw Score: 7057% 35 29 of 50 pts 2 P4-10 (similar to) Efficiency analysis) Al eil Industries has aredi sales of $141 million a. What is the maximum level of accounts receivable that ALel can carry and have a 40 day average colection periad? Question Help a year ALefs management reviewed its credt poäicy and dacided thatit wants to maintain an average collection periad of 40 days b. ALef's curent accounts receivable collection period is 55 days, how mach would it have to reduce its level of accounts ?. what is the maxi un levol of accounts receivable hat ALe can carry and have a 40day average cohdon period, The maximum level of accounts recevable will be smillion (Round to one decimal place Enter your answer in the answer box and then click Check Answer Clear Al Check Answe Copy of Excel Ass. .s 22018-10 Show allx 213 PM O Type here to search oe 5 8

Explanation / Answer

A.

Average collection period(ACP) = accounts receivable balance / net credit sales x 365

40 = (accounts receivable balance / 141) x 365

so maximum accounts receivable balance can be 15.5 million.

b.

Average collection period(ACP) = (accounts receivable balance / net credit sales) x 365 days

55 = ( accounts receivable balance / 141) x 365

so maximum accounts receivable balance can be 21.2 million.

At 55 days of ACP  maximum accounts receivable balance can be 21.2 million.

At 40 days of ACP  maximum accounts receivable balance can be 15.5 million.

Accounts receivable to be reduced in order to acheive the goal of 40 days of ACP = 21.2 - 15.5 = 5.7 million

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.