Evaluate what is the retailer effective cost of trade credit

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Receivables Investment

Question 1: Medwig Corporation has a DSO of 21 days. The company averages $3,750 in sales each day (all customers take credit). What is the company's average accounts receivable? Round your answer to the nearest dollar.

Cost of Trade Credit

Question 2: A large retailer obtains merchandise under the credit terms of 1/20, net 40, but routinely takes 55 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume 365 days in year for your calculations. Do not round intermediate calculations. Round your answer to two decimal places.

Reference no: EM132596949

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