Barans Company currently has an average collection period of 55 days and annual sales of $1 billion.
Question:
a. What is the firm’s average accounts receivable balance?
b. If the variable cost of each product is 65% of sales, what is the average investment in accounts receivable?
c. If the equal-risk opportunity cost of the investment in accounts receivable is 12%, what is the total annual cost of the resources invested in accounts receivable?
Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that... Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...
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Related Book For 
Introduction to Corporate Finance What Companies Do
ISBN: 978-1111222284
3rd edition
Authors: John Graham, Scott Smart
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