solve this question Financial accounting Harrison Manufacturing has annual sales of $250,000and accounts receivable of $24,800. They currentlygive customers 35 days to pay. The industry averageDSO is 29 days, based on a 365-day year. If thecompany improves its collection policy to match theindustry average DSO, and they can earn 9% on thefreed-up cash, how much would their net incomeincrease, assuming other factors remain constant?

Step 1: Define Days' Sales Outstanding (DSO) and Net Income ImpactDays' Sales Outstanding (DSO)…

Answered: Harrison Manufacturing has annual sales…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter22: Providing And Obtaining Credit

Section: Chapter Questions

Problem 2MC

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Han Corp's sales last year were $300,000, and its year-end receivables were $49,000. The firm sells on terms that call for customers to pay 30 days after the purchase, but some delay payment beyond Day 30. On average, how many days late do customers pay? Base your answer on this equation: DSO - Allowed credit period = Average days late, and use a 365-day year when calculating the DSO. Assume all sales to be on credit. Do not round your intermediate calculations.
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Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $270,000 if credit is extended to these new customers. Of the new accounts receivable generated, 9 percent will prove to be uncollectible. Additional collection costs will be 6 percent of sales, and production and selling costs will be 75 percent of sales. 1. Compute the incremental income before taxes. 2. What will the firm’s incremental return on sales be if these new credit customers are accepted? (Round final answer to 2 decimals) 3. If the receivable turnover ratio is 5 to 1, and no other asset buildup is needed to serve the new customers, what will Johnson Electronics’ incremental return on new average investment be? (Round only the final answer to %)
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Ingraham Inc. currently has $525,000 in accounts receivable, and its days sales outstanding (DSO) is 67 days. It wants to reduce its DSO to 20 days by pressuring more of its customers to pay their bills on time. If this policy is adopted, the company's average sales will fall by 15%. What will be the level of accounts receivable following the change? Assume a 365-day year. Do not round intermediate calculations. Round your answer to the nearest dollar. $
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Ingraham Inc. currently has $205,000 in accountsreceivable, and its days sales outstanding (DSO) is 71 days. It wants to reduce its DSOto 20 days by pressuring more of its customers to pay their bills on time. If this policy is adopted, the company’s average sales will fall by 15%. What will be the level of accountsreceivable following the change? Assume a 365-day year.
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Suppose that Treyton Manufacturing has annual sales of $6.30 million, cost of goods sold of $3.20 million, average inventories of $1,500,000, and average accounts receivable of $600,000. Assuming that all of Treyton's sales are on credit, what will be the firm's operating cycle?

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