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Effective credit management involves establishing credit standards for extending credit to customers, determining the company's terms of credit, and setting up procedures for invoicing and
Effective credit management involves establishing credit standards for extending credit to customers, determining the company's 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 company's Consider the case of Water and Power Co.: Water and Power Co.'s CFO has decided to take a closer look at the company's credit policy. Water and Power Co. has annual sales of $396.3 million, and it currently has an accounts receivable balance of $45.4 million. The first step in analyzing the firm's credit policy is to determine its days sales outstanding (DSO). Based on this information, Water and Power Co.'s DSO is___. The average DSO for Water and Power Co.'s industry is 51.2 days. Assuming that its sales stayed the same, what would be Water and Power Co.'s receivables balance if it maintained the industry average DSO? Water and Power 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 Water and Power Co. to lose 6% of its sales revenue. What would Water and Power Co.'s expected accounts receivables balance be if it decides to tighten its credit policy? $33, 680, 064 $29, 087, 328 $26, 025, 504 $30, 618, 240
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