Effective credit management involves establishing credit standards for extending credit to customers, determining the companys terms of credit, 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______ .

Consider the case of Western Gas & Electric Co.:

Western Gas & Electric Co. has a very attractive credit policy, and none of its customers pays in cash when the firm makes a sale. Western Gas & Electric Co. sells to its customers on credit terms of 3/10, net 30.

If a customer bought $125,000 worth of goods and paid the firm cash eight days after the sale, how much cash would Western Gas & Electric Co. get from the customer? (Note: Round your answer to the nearest whole dollar.)

$103,125

$125,000

$121,250

$115,625

If the customer paid off the account after 15 days, Western Gas & Electric Co. would receive______ . (Note: Round your answer to the nearest whole dollar.)

Approximately 25% of Western Gas & Electric Co.s customers take advantage of the discount and pay on the 10th day. The remaining 75% take an average of 35 days to pay off their accounts. What is Western Gas & Electric Co.s days sales outstanding (DSO), or the average collection period? (Note: Do not round intermediate calculations. Round your answer to one decimal place.)

28.8 days

23.0 days

34.6 days

31.7 days