A firm offers terms of 4/55, net 85. Currently, two-thirds of all customers take advantage of the trade discount; the remainder pay bills at the due date.
a.What will be the firm’s typical value for its accounts receivable period? (Do not round intermediate calculations.)
Accounts receivable period……….days
b.What is the average investment in accounts receivable if annual sales are $15 million? (Use 365 days in a year. Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.)
Investment in accounts receivable…….$ million
c.What would likely happen to the firm’s accounts receivable period if it changed its terms to 5/55, net 85?
Increase
Decrease
