5% MINDTAP Assignment 15- Working Capital Management Due on Nov 27 at 11 PM EST

Question

5% MINDTAP Assignment 15- Working Capital Management Due on Nov 27 at 11 PM EST Back to Assignment Attempts Keep the Highest: 14 8. Accounts receivable Aa Aa Effective credit management involves establishing credit standards for extending credit to customers, determining the company's terms of credit, and setting up procedures for invoicing and collecting past-due accounts. The following statement refers to a credit management policy. Select the best term to complete the sentence The conditions of the credit sale, including cash discounts and due dates, are indicated by the company's Consider the case of Newtown Co.: Newtown Co.'s CFO has decided to take a closer look at the company's credit policy. Newtown Co. has annual sales of $379.3 million, and it currently has an accounts recelvable balance of $45.9 million. The first step in analyzing the firm's credit policy is to determine its days sales outstanding (DSO). Based on this information, Newtown Co.'s DSO is calculations.) . (Note: Use 365 days as the length of a year in all The average DSo for Newtown Co.'s Industry ls 54.1 days. Assuming that its sales stayed the same, what would be Newtown Co.'s receivables balance if it maintained the industry average DSO? s CFO thinks that the Type here to search

Explanation / Answer

1-

credit policy

2- days sales outstanding in days

365/ accounts receivable turnover ratio

365/8.2636

44.169611

accounts receivable turnover ratio = sales/accounts receivables

379.3/45.9

8.2636166

3-

Newton company’s accounts receivables if days sales of industry is maintained

days sales outstanding

54.1 = 365/accounts receivables

accounts receivables

365/54.1

6.746765

accounts receivables turnover ratio = sales/accounts receivables

6.746= 379.3/accounts receivables

accounts receivables in millions

379.3/6.746

56.22591

4-

DSO

30 days

new level of sales

379.3*(1-decrease in sales)

379.3*(1-.5)

360.335

days sales outstanding

30 = 365/accounts receivables turnover ratio

accounts receivable turnover ratio =

365/30

12.16667

accounts receivable turnover ratio

sales/accounts receivables

12.1666 = 360.335/accounts receivables

accounts receivables in millions

29.61674

Accounts receivables

29.61674*1000000

29616740

1-

credit policy

2- days sales outstanding in days

365/ accounts receivable turnover ratio

365/8.2636

44.169611

accounts receivable turnover ratio = sales/accounts receivables

379.3/45.9

8.2636166

3-

Newton company’s accounts receivables if days sales of industry is maintained

days sales outstanding

54.1 = 365/accounts receivables

accounts receivables

365/54.1

6.746765

accounts receivables turnover ratio = sales/accounts receivables

6.746= 379.3/accounts receivables

accounts receivables in millions

379.3/6.746

56.22591

4-

DSO

30 days

new level of sales

379.3*(1-decrease in sales)

379.3*(1-.5)

360.335

days sales outstanding

30 = 365/accounts receivables turnover ratio

accounts receivable turnover ratio =

365/30

12.16667

accounts receivable turnover ratio

sales/accounts receivables

12.1666 = 360.335/accounts receivables

accounts receivables in millions

29.61674

Accounts receivables

29.61674*1000000

29616740

Related Questions

Navigate

• Browse (All)
• Browse 5
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.