Annual volume of box (in master cases): 500,000 Net price per master case: $75.00 Credit terms: 1%, 15; net 45. According to the firms management, 45% of the customers take the discount and pay on Day 15; 50% pay at the end of the credit period on Day 45; the final 5% pay late on Day 50. The management of box Company has asked that you complete your analysis and provide answers to the following questions.

1) What is the box Companys current Days Sales Outstanding (DSO), based on the information provided by the firms management?

2) Calculate Box Companys Average Daily Sales, assuming a 365-day year?

3) Based upon the information you have calculated in Questions #1 and #2 above, calculate the firms Accounts Receivable balance.

4) Now assume that the management of Box Company decides to tighten the firms credit terms to reduce the amount of financing needed for Accounts Receivable. The new credit terms are 2%, 10; net 30. Assume that customers continue their same payment patterns: 45% take the discount and pay on Day 10; 50% pay at the end of the credit period on Day 30; the final 5% pay late on Day 35.

a. What is Box Companys new Days Sales Outstanding (DSO), based on the proposed new credit terms?

b. Based on the Average Daily Sales that you calculated in Question #2 above and the firms new DSO that you calculated in Question #4.a. above, what is Box Companys likely Accounts Receivable balance if the new credit terms are implemented?