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A company plans to tighten its credit policy. The new policy will decrease the average number of days in collection from 75 to 50 days and will reduce the ratio of credit sales to total revenue from 70 to 60 percent. The company estimates that projected sales would be five percent less if the proposed new credit policy is implemented. If projected sales for the coming year are $50 million, calculate the dollar impact on accounts receivable of this proposed change in credit policy. Assume a 360-day year.
Suggested Answer: C
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Choice 'c' is correct. $3,333,334 decrease in accounts receivable.
13 comments · newest first
TR
Trinidad
11 months ago
The new policy will reduce credit sales to 60%.
JO
Jovita
11 months ago
I agree, cutting collection days is a smart move!
IS
Isreal
11 months ago
Wait, a 5% drop in sales? That seems steep.
CH
Cherelle
11 months ago
Totally makes sense to tighten credit!
CY
Cyril
11 months ago
The average collection days drop from 75 to 50.
ST
Staci
12 months ago
I think I remember that we need to calculate the average accounts receivable before and after the policy change. I hope I can remember how to apply the 360-day year correctly!
CI
Ciara
12 months ago
I feel a bit confused about the sales reduction affecting the calculations. I remember something about using the credit sales percentage, but I can't recall the exact steps.
CH
Charlette
12 months ago
This question seems similar to one we practiced about adjusting credit terms. I think the decrease in collection days will definitely lower accounts receivable, but I'm not sure how to factor in the sales decrease.
GI
Gianna
1 year ago
I remember we discussed how to calculate the impact on accounts receivable based on changes in collection days. I think I need to double-check the formulas we used.
LE
Leonor
1 year ago
I've got this! The two components to uniquely identify a row in Azure Table storage are the row key and the partition key. Easy peasy.
CA
Cassie
1 year ago
This looks straightforward, I'm pretty confident I can answer this one.
CA
Carmen
1 year ago
I'm leaning towards manding behavior because Ingrid is learning to request things from the pictures, right? But then again, it could involve other concepts like generalization... I'm not certain.
VI
Vincenza
1 year ago
I feel like "End Node" sounds familiar, but I'm unsure how it fits into the gateway role. Ugh, I don't want to mess this up!