A firm currently offers credit terms of 2/15, n/45. You want to change the credit policy to 2/10, n/40. As a result of this change, sales are expected to rise by 12%, bad debts will rise from 2% to 4%. All sales are credit sales.
Currently 43% of customers pay off their accounts in 15 days with 55% paying in 45 days and 2% paying in 100 days or not at all. The change will decrease those paying early to 42% and will decrease those paying net to 54% with 4% late payers.
a. Calculate the new ACP
b. Calculate the new net income
c. Calculate the new accounts receivable.

Question

A firm currently offers credit terms of 2/15, n/45. You want to change the credit policy to 2/10, n/40. As a result of this change, sales are expected to rise by 12%, bad debts will rise from 2% to 4%. All sales are credit sales.
Currently 43% of customers pay off their accounts in 15 days with 55% paying in 45 days and 2% paying in 100 days or not at all. The change will decrease those paying early to 42% and will decrease those paying net to 54% with 4% late payers.
  a. Calculate the new ACP
b. Calculate the new net income
c. Calculate the new accounts receivable.

Quizplus · Accepted Answer

The Answer of A firm currently offers credit terms of 2/15, n/45. You want to change the credit policy to 2/10, n/40. As a result of this change, sales are expected to rise by 12%, bad debts will rise from 2% to 4%. All sales are credit sales.
Currently 43% of customers pay off their accounts in 15 days with 55% paying in 45 days and 2% paying in 100 days or not at all. The change will decrease those paying early to 42% and will decrease those paying net to 54% with 4% late payers.
  a. Calculate the new ACP
b. Calculate the new net income
c. Calculate the new accounts receivable.

A Firm Currently Offers Credit Terms of 2/15, N/45