Collections of accounts receivable

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Problem 1

Fat Tony's Bookkeeping is thinking of hiring Fat Tony's cousin Guido to help with collections of accounts receivable. Fat Tony provided you with the following information:

Yearly sales 600,000

Current average collection period 45 days

Average collection period with Guido 5 days

Percentage sales lost if they hire Guido 5%

Guido's annual charge 5,000

Fat Tony's return on assets 20%

Fat Tony's profit margin 25%

Should Fat Tony hire his cousin Guido to help with collections?

Reference no: EM132481789

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