Question
#2. ABC Corp is considering changing its payment policy for customers. Currently, ABC requires customers to pay for all delivered shipments within 90 days of
#2. ABC Corp is considering changing its payment policy for customers. Currently, ABC requires customers to pay for all delivered shipments within 90 days of receipt. Since the economy is slowing down, ABC is contemplating allowing customers to have up to 270 days to pay for all delivered shipments. Briefly (i.e., in 1 or 2 sentences) explain your answers to the following. (a) Will this policy increase or decrease the accounts receivable item on ABCs balance sheet? (b) In the short run, will this policy result in a major change in the net income of ABC Corp? (c) In the short run, will this policy result in a major change in the cash flow of ABC Corp? (d) In the long run (i.e. after a few years), will this policy result in a major change in the cash flow of ABC Corp.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started