Kirby Industries has sales of $110,000 and accounts receivable of $12,500, and i

Question

Kirby Industries has sales of $110,000 and accounts receivable of $12,500, and it gives its customers 30 days to pay. The industry average DSO is 25.5 days, based on a 365 day year. If the company changes its credit and collection policy sufficient to cause its DSO to fall to the industry average, and if it earns 9.5% on any cash freed-up by this change, how would that affect the firm's net income, assuming other things are held constant?a. Net income would increase b. net income would decrease c. net income would not be affected

Explanation / Answer

Hi, If you like my answer rate me first...that way only I can earn points. Thanks Since the new DSO becomes 25.5 days now, so cash will free up, and since it earns 9.5% so, a. Net income would increase

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