Chapter Review 15-Working Capital Management Due on Dec 7 at 11:59 PM PST 8. Acc

Question

Chapter Review 15-Working Capital Management Due on Dec 7 at 11:59 PM PST 8. Accounts receivable Aaa ve 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 The minimum financial strength a customer must have to be granted credit is indicated by the company's policy. Select the best term to complete the sentence. credit terms collection policy OmSTUer oner tasr ur Tun Ash Inc. Tun Ash Inc.'s CFO has decided to take a closer look at the company's credit policy. Tun Ash Inc. has annual sales of $396.3 million, and it currently accounts firm has an accounts receivable balance of $45.9 million. The first step in analyzing the s credit policy is to determine its days sales outstanding (DSO) (Note: Use 365 days as the length of a year in all Based on this information, Tun Ash Inc.'s DSO is calculations.) The average DSO for Tun Ash Inc.'s industry is 51.7 days. Assuming that its sales stayed the same, what would be Tun Ash Inc.'s receivables balance if it maintained the industry average DSO?[- Tun Ash Inc.'s CFO thinks that the company has not done a very good job of enforcing its credit policy. The Cro believes that if the company were to better enforce its credit policy, it would reduce its DSO to 30 days; however this will cause Tun Ash Inc. to lose 7% ofits sales revenue. What would Tun Ash Inc.'s expected accounts receivables balance be if it decides to tighten its credit policy? O $31,807,125 O$33,321,750 $30,292,500 O $36,351,000

Explanation / Answer

1 DSO AR*Sales/365 45.9*396.3/365 50 Days Answer 2 AR DSO*365/Sales 51.7*365/396.3 47.61670 million Answer 3 7% of Sales (1-7%)*396.3 368.559 million Sales per day = 368.559/365 1.0097507 million AR = 1.0097507*30 30.2925 million $3,02,92,500 Answer

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

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