Question
Anaheim Ltd has accounts receivable balances which average $400 000 on most trading days of the year. If Anaheim Ltd could reduce that balance by
Anaheim Ltd has accounts receivable balances which average $400 000 on most trading days of the year. If Anaheim Ltd could reduce that balance by half, it believes it could increase its inventory, sales and profitability. The financial manager says annual profitability will rise by $150 000. Anaheim Ltd is afraid to exert too much pressure on its accounts receivable for fear of losing customers. Required: a. How could Anaheim Ltd encourage its customers to pay earlier? (2.5 Points) b. If Anaheim Ltd's accounts receivable management strategies result in average debtors reducing to $200 000, how would this lead to increases in sales and profitability? (2.5 Points)
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