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Compute the company average collection period

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1. Using the data in Figures 1 and 2, compute the company's average collection period (ACP) in days. Use a 360-day year when calculating sales per day.

2. Compute the cost, as a percent, that the company is paying for not taking the supplier's discounts. (The supplier's terms are 2/10, net 60; but note from the bottom of Figure 2 that Fresh & Fruity has been taking 67 days to pay its suppliers, making that the effective final due date for accounts payable.)

3. Assume that Alice Plummer's first initiative to offer a 10 percent discount was implemented, and the company's average collection period dropped to 32 days. If net sales per day remained the same, as Alice expects, what would be the new accounts receivable balance? How much cash was freed up by the reduction in accounts receivable? What is the new accounts payable balance if the money is used to pay off suppliers?

Reference no: EM133070183

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