Problem 4. Wendy Company currently has P750,000 in accounts receivable. Its days sales outstanding (DSO) is 55 days. Wendy Company wants to reduce its DSO to the industry average of 35 days by pressuring more of its customers to pay their bills on time. The company's CFO estimates that if this policy is adopted Wendy's average sales will fall by 15%. Assuming that the company adopts this change and succeeds in reducing its average collection period to 35 days and does lose 15% of its sales, what will be the level of accounts receivable (to the nearest peso) following the change?

Problem 4. Wendy Company currently has P750,000 in accounts receivable. Its days sales outstanding (DSO) is 55 days. Wendy Company wants to reduce its DSO to the industry average of 35 days by pressuring more of its customers to pay their bills on time. The company's CFO estimates that if this policy is adopted Wendy's average sales will fall by 15%. Assuming that the company adopts this change and succeeds in reducing its average collection period to 35 days and does lose 15% of its sales, what will be the level of accounts receivable (to the nearest peso) following the change?

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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Atlantic Northern Inc. currently has $715,000 in accounts receivable and generated $4,650,000 in sales (all on credit) during the year that just ended. The firm’s days sales outstanding (DSO) is days. Use 365 days as the length of a year in all calculations. Atlantic Northern Inc.’s CFO is unhappy with its DSO and wants to improve collections next year. Sales are expected to grow by 13% next year, and the CFO wants to lower the DSO to the industry average of 30 days. How much accounts receivable is the firm expected to carry? $453,471 $431,877 $410,283 $388,689
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Piedmont Industries sells on terms of 2/10 net 30. Total sales for the year are $1.5 million. Thirty percent of customers pay on the 10th day and take discounts; the other 70% pay, on average, 60 days after their purchases. What would happen to average receivables if Piedmont toughened its collection policy with the result that all non-discount customers paid on the 40th day?
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