Question
An aggressive credit manager has taken over Salvation Corporation. Currently, sales are about P21.6 million a year. The credit manager believes that by establishing credit
An aggressive credit manager has taken over Salvation Corporation. Currently, sales are about P21.6 million a year. The credit manager believes that by establishing credit terms of 2/10, net 30, he can reduce the collection period from 60 days to 20 days, on average. The credit manager expects that 80% of the total credit customers will take advantage of the discount and that all of the funds received from the receivables can be invested at 15 percent. Moreover, the company expects to reduce its collection costs by P90,000 a year on this new credit policy.
What is the average receivable balance after the change in the credit policy?
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