Kim Mitchell, the new credit manager of the Vinson Corporation, was alarmed to find that Vinson sells on credit terms of net 90 days while industry-wide credit terms have recently been lowered to net 30 days. On annual credit sales of $2.89 million, Vinson currently averages 95 days of sales in accounts receivable. Mitchell estimates that tightening the credit terms to 30 days would reduce annual sales to $2,765,000, but accounts receivable would drop to 35 days of sales and the savings on investment in them should more than overcome any loss in profit. Assume that Vinsons variable cost ratio is 87%, taxes are 40%, and the interest rate on funds invested in receivables is 20%.The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions above.
C Get Homework Help With Cheg C X Unit IV-Other Financial Topics + Excel Onine Student Work X X X O aboutblank C X Excel Saved template Tell me what you want to do OComments Insert Review File Home Data View Help X Cut Arial 10 A A Wrap Text Currency AutoSum Copy Sort &Find& Filter Select L EEE Merge & Center aste Inse Delete Format Conditional Tormat B I Dab $-% Clear A - Format Painter Formatting as lable- Clipboard A Undo font Alignment Number Tebles Cells Editing B23 A B C D F G H K M N P R Tghtening Credit Terms 1 2 Firm's current credit terms, net 90 days 30 days 3 Industry-wide aredit terms, net DeCOunts S0 5 Dad Debt Lossos S0 6 7 Fim's vanable cost ratio 870 Tax rate alo 4000% Interest rate on funds invested in reosivables 20.00 % 9 Days in year 365 10 11 Current Credit Palicy 12 Annual credit sales ays sales outstanding, DSO S2,890,000 95 days 13 14 15 New Credt Pulicy, Tghle to industry- Aerage Crer Tems Anual credil salos Days sales outstanding, DSO 16 S2,765,000 17 18 35 days 19 Projected Income Slatement Under Effect of Projeced Income Slalement Under New Credit Pulicy Change $125,000 Credit Policy $2,765,000 20 Changing red Pacy Analysus Gruss sakes Current Credt Policy S2,090,000 21 22 DCOunts 23 Net sakes 24 Variable costs Sheet1 H Saved to Cengage Help Improve Office 6:22 PM OHH Type here to search 11/12/201921 C Get Homework Help With Cheg C X Unit IV-Other Financial Topics + Excel Onine Student Work X X X O aboutblank C X Excel Saved template Tell me what you want to do OComments Insert Review File Home Data View Help X Cut Arial 10 A A Wrap Text Currency AutoSum Copy Sort &Find& Filter Select L EEE Merge & Center aste Inse Delete Format Conditional Tormat B I Dab $-% Clear A - Format Painter Formatting as lable- Clipboard A Undo font Alignment Number Tebles Cells Editing B23 A B C D F G H K M N P R Tghtening Credit Terms 1 2 Firm's current credit terms, net 90 days 30 days 3 Industry-wide aredit terms, net DeCOunts S0 5 Dad Debt Lossos S0 6 7 Fim's vanable cost ratio 870 Tax rate alo 4000% Interest rate on funds invested in reosivables 20.00 % 9 Days in year 365 10 11 Current Credit Palicy 12 Annual credit sales ays sales outstanding, DSO S2,890,000 95 days 13 14 15 New Credt Pulicy, Tghle to industry- Aerage Crer Tems Anual credil salos Days sales outstanding, DSO 16 S2,765,000 17 18 35 days 19 Projected Income Slatement Under Effect of Projeced Income Slalement Under New Credit Pulicy Change $125,000 Credit Policy $2,765,000 20 Changing red Pacy Analysus Gruss sakes Current Credt Policy S2,090,000 21 22 DCOunts 23 Net sakes 24 Variable costs Sheet1 H Saved to Cengage Help Improve Office 6:22 PM OHH Type here to search 11/12/201921
