3. Accounts receivable

Effective credit management involves establishing credit standards for extending credit to customers, determining the companys credit terms, and setting up procedures for invoicing and collecting past-due accounts.

The following statement refers to a credit management policy. Select the best term to complete the sentence.

The conditions of the credit sale, including cash discounts and due dates, are indicated by the companys CREDIT STANDARDS/COLLECTION POLICY/CREDIT TERMS.

Consider the case of Wizard Co.:

Wizard Co.s CFO has decided to take a closer look at the companys credit policy. Wizard Co. has annual sales of $384.4 million, and it currently has an accounts receivable balance of $45.9 million. The first step in analyzing the firms credit policy is to determine its days sales outstanding (DSO).

Based on this information, Wizard Co.s DSO is 43.58/39.22/34.86/37.04 . (Note: Use 365 days as the length of a year in all calculations.)

The average DSO for Wizard Co.s industry is 53.4 days. Assuming that its sales stayed the same, what would be Wizard Co.s receivables balance if it maintained the industry average DSO? 3. Accounts receivable

Effective credit management involves establishing credit standards for extending credit to customers, determining the companys credit terms, and setting up procedures for invoicing and collecting past-due accounts.

The following statement refers to a credit management policy. Select the best term to complete the sentence.

The conditions of the credit sale, including cash discounts and due dates, are indicated by the companyscredit terms .

Consider the case of Wizard Co.:

Wizard Co.s CFO has decided to take a closer look at the companys credit policy. Wizard Co. has annual sales of $384.4 million, and it currently has an accounts receivable balance of $45.9 million. The first step in analyzing the firms credit policy is to determine its days sales outstanding (DSO).

Based on this information, Wizard Co.s DSO is . (Note: Use 365 days as the length of a year in all calculations.)

The average DSO for Wizard Co.s industry is 53.4 days. Assuming that its sales stayed the same, what would be Wizard Co.s receivables balance if it maintained the industry average DSO? $59,050,176/56,238,263/64,674,002/44,990,610.

Wizard Co.s CFO thinks that the company has not done a very good job of enforcing its credit policy. The CFO believes that if the company were to better enforce its credit policy, it would reduce its DSO to 30 days; however, this will cause Wizard Co. to lose 5% of its sales revenue. What would Wizard Co.s expected accounts receivables balance be if it decides to tighten its credit policy?

$30,014,790

$33,016,269

$31,515,530

$28,514,051