Additional Investment In Accounts Receivable
Additional Investment In Accounts Receivable. Overview you have been asked to assess the expected financial impact of each of the following proposals to improve the profitability of credit sales made by your company. Cost of marginal investment in accounts receivable:
It is clear that the cash flow invested in additional accounts receivable is the input, as it is the scarce resource of the firm that can be invested in a variety of areas. The following procedures are recommended in establishing a policy concerning billing: [q1] owner invested $700,000 in the business.
Determine The Annual Dollar Cost Of The Additional Investment In Accounts Receivable.
(a) extra investment, if all accounts receivables take two months credit average account receivable after the sales increase (2/12 x $3,000,000 ) 500,000 doubts The solution discusses the change of additional investment in account receivable. The profitability on additional sales generated must be compared with the amount of additional bad debts expected, higher investment and collection.
The Solution Explains How To Calculate The Investment In.
It is clear that the cash flow invested in additional accounts receivable is the input, as it is the scarce resource of the firm that can be invested in a variety of areas. • customer statements should be sent within 1 day subsequent to the close of the period. The accounts receivable turnover ratio is an efficiency ratio that measures the number of times over a year (or another time period) that a company collects its average accounts receivable.
Accounts Receivable Process Is Basically Managing The Accounts And Giving Facilities To The Customers So As To Maintain The Long Term Relationship With The Customers.
[q1] owner invested $700,000 in the business. Investment in accounts receivable represents the cost of capital tied up in those receivables. Average collection period = 30 days given + 15 days overdue = 45.
Compute The Additional Investment In Accounts Receivable.
Awesome autos expects to sell 1,560 new automobiles in the next year. Below you will find descriptions and details for the 1 formula that is used to compute investments in accounts receivable. P1,067, if the credit policy change is made, the cost of the additional investment in accounts receivable and inventory will be:
Account Receivable Is An Account Created By A Company To Record The Journal Entry Of Credit Sales Of Goods And Services, For Which The Amount Has Not Yet Been Received By The Company.
Any increase in accounts receivables or an additional extension of trade credit granted to customers not only results in higher sales but is also accompanied with additional financing required to support the increased investment in accounts receivables. Determine the additional investment in accounts receivable that will result if the firm takes the proposal. Cally to the investment in accounts receivable provides insights into the issue at hand.
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