Question 2

LPLBoots accountant indicates that longer receivables settlement periods are becoming common in the industry and the firm is losing some customers who are attracted by the longer receivables settlement periods offered by competitors. As such, the management of LPLBoots is considering extending the receivables settlement periods as follows:

Scenario A: 40 days

Scenario B: 50 days

Scenario C: 60 days

Required:

Compute the increase in the average receivables, for each scenario (3 marks)