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What is the average receivables balance

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Reference no: EM132915669

Question 1 - Pinkertons has credit sales of $550,000 yearly with customers paying on average in 65 days. Pinkertons does not currently offer a discount for early payment. What is the average receivables balance?

Question 2 - Assume Pinkertons offers new trade terms of 1/10, Net 30. All customers take the discount and pay in 10 days, and sales increase by 12 percent as a result of this discount incentive. If Pinkertons earns 25 percent on sales (before discounts) and can reduce their 2% bank loan due to the early payments, should they offer these new discount terms? Support your answer with all relevant calculations.

Reference no: EM132915669

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