XYZ Inc. sells on terms of 2/10, net 30. Total sales for the year are...
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XYZ Inc. sells on terms of 2/10, net 30. Total sales for the year are $1,000,000. Consider 30 percent of the customers take discounts and pay on the 10th day, while the other 70 percent pay, on average, 45 days after their purchases.
1. What is the days' sale outstanding?
2. Determine the average amount of receivables.
3. For the customers who take the discount, what is the percentage cost of trade credit?
4. For the customers who do not take the discount and pay in 45 days, what is the percentage cost of trade credit?
5. What would happen to XYZ's account receivable if it created a new collection policy that required all non-discount customers to pay on the 30th day?
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