Northwest Dialysis Supplies, Inc, sells on terms of 3/10, net 30. Gross sales for the year are $1,200,000, and the collections department estimates that 30 percent of the customers pay on the tenth day and take discounts, 40 percent pay on the thirtieth day, and the remaining 30 percent pay, on average, 40 days after the purchase. (Assume 360 days per year.) a. What is the company's average collection period? b. What is the company's current receivables balance? c. What would be the company's new receivables balance if it tightened up on its collection policies with the outcome that all non-discount customers paid on the thirtieth day? d. Suppose the company's cost of carrying receivables was 8 percent annually; how much would the tightened credit policy save the company in annual receivables carrying expense?

Northwest Dialysis Supplies, Inc, sells on terms of 3/10, net 30. Gross sales for the year are $1,200,000, and the collections department estimates that 30 percent of the customers pay on the tenth day and take discounts, 40 percent pay on the thirtieth day, and the remaining 30 percent pay, on average, 40 days after the purchase. (Assume 360 days per year.) a. What is the company's average collection period? b. What is the company's current receivables balance? c. What would be the company's new receivables balance if it tightened up on its collection policies with the outcome that all non-discount customers paid on the thirtieth day? d. Suppose the company's cost of carrying receivables was 8 percent annually; how much would the tightened credit policy save the company in annual receivables carrying expense?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter21: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 11P: Negus Enterprises has an inventory conversion period of 50 days, an average collection period of 35...

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Snider Industries sells on terms of 2/10, net 45. Total sales for the year are$1,500,000. Thirty percent of customers pay on the 10th day and take discounts; the other 70% pay, on average, 50 days after their purchases.a. What is the days sales outstanding?b. What is the average amount of receivables?c. What would happen to average receivables if Snider toughened its collection policy with the result that all nondiscount customers paid on the45th day?
Libscomb Technologies' annual sales are $6,974,991 and all sales are made on credit, it purchases $3,511,535 of materials each year (and this is its cost of goods sold). Libscomb also has $550,869 of inventory, $522,928 of accounts receivable, and $477,584 of accounts payable. Assume a 365 day year. What is Libscomb’s Inventory Turnover?
Libscomb Technologies' annual sales are $6,997,444 and all sales are made on credit, it purchases $3,879,449 of materials each year (and this is its cost of goods sold). Libscomb also has $530,851 of inventory, $490,754 of accounts receivable, and $417,441 of accounts payable. Assume a 365 day year. What is Libscomb’s Receivables Turnover?
McDowell Industries sells on terms of 3/10, net 30. Total sales for the year are $912,500; 40% of the customers pay on the 10th day and take discounts, while the other 60% pay, on average, 40 days after their purchases. What is the day’s sales outstanding? What is the average amount of receivables? What is the percentage cost of trade credit to customers who take the discount? What is the percentage cost of trade credit to customers who do not take the discount and pay in 40 days. What would happen to McDowell’s account receivable if it toughened up on its collection policy with the result that all nondiscount customers paid on the 30th day?
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Libscomb Technologies' annual sales are $5,790,872 and all sales are made on credit, it purchases $3,221,342 of materials each year (and this is its cost of goods sold). Libscomb also has $539,653 of inventory, $498,477 of accounts receivable, and $416,602 of accounts payable. Assume a 365 day year. What is Libscomb’s Inventory Period (in days)?
Grunewald Industries sells on terms of 1/10, net 40. Gross sales last year were $4,453,000 and accounts receivable averaged $427,000. Half of Grunewald's customers paid on the 10th day and took discounts. What are the nominal and effective costs of trade credit to Grunewald's nondiscount customers? (Hint: Calculate daily sales based on a 365-day year, calculate the average receivables for discount customers, and then find the DSO for the nondiscount customers.) Do not round intermediate calculations. Round your answers to two decimal places.
ssence of Skunk Fragrances, Ltd., sells 6,900 units of its perfume collection each year at a price per unit of $399. All sales are on credit with terms of 2/30, net 50. The discount is taken by 50 percent of the customers. a.What is the amount of the company’s accounts receivable? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)b.In reaction to sales by its main competitor, Sewage Spray, Essence of Skunk is considering a change in its credit policy to terms of 4/30, net 50 to preserve its market share. Will this change in policy increase or decrease accounts receivable?