Problem solved company has been operating for five years as a software consulting firm. During this period, it has experienced rapid growth in Sales Revenue and in Accounts Receivable. To solve its growing receivables problem, the company hired you as its first corporate controller. You have put into place more stringent credit-granting and collection procedures that you expect will reduce receivables by approximately one-third by year-end. You have gathered the following data related to the changes (in thousands).

(in thousands)

Beginning of year End of year(projected)

Accounts Receivable $1,000,608 $660,495

Less: Allowance for doubtful accounts (36,800) (10,225)

Accounts Receivable, net 963,808 650,270

Prior Year Current Year Projected

Net Sales (assume all credit) $7,515,444 $7,015,069

1. Compute, to one decimal place, the accounts receivable turnover ratio based on three different assumptions:

a. The stringent credit policies reduce Accounts receivable, net and decrease Net sales as projected in the table.

b. The stringent credit policies reduce Accounts receivable, net as projected in the table but do not decrease Net sales from the prior year.

c. The stringent credit policies are not implemented, resulting in no change from the beginning of the year Accounts receivable balance and no change in Net sales from the prior year.

2. What does a stringent credit policy entail. Think of how the work may change for the people who handle accounts receivable. What kind of tasks may they be doing in each scenario? Also consider the changes in the ratio and its components.