Nevergreen's standard terms on sales invoices are 30 days, but analysis has shown that on average customers pay on 45 days. Total sales revenue is £10,000,000 and the company expects irrecoverable receivables of £200,000. A suggestion has been made to offer a 5% discount to customers paying when ordering (i.e. O days). It is expected that 20% of customers will take advantage of this. Irrecoverable receivables would be expected to fall to £100,000 and administrative savings on credit control would amount to £50,000. The average number of days to pay for the remaining 80% of customers would be expected to increase to 50 days.

Nevergreen's standard terms on sales invoices are 30 days, but analysis has shown that on average customers pay on 45 days. Total sales revenue is £10,000,000 and the company expects irrecoverable receivables of £200,000. A suggestion has been made to offer a 5% discount to customers paying when ordering (i.e. O days). It is expected that 20% of customers will take advantage of this. Irrecoverable receivables would be expected to fall to £100,000 and administrative savings on credit control would amount to £50,000. The average number of days to pay for the remaining 80% of customers would be expected to increase to 50 days.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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