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What is the average receivables balance

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Reference no: EM132915902

Problem - Aunt Donkey has credit sales of $400,000 yearly with customers paying on average in 55 days. Aunt Donkey does not currently offer a discount for early payment.

Required -

a. What is the average receivables balance?

b. Assume Aunt Donkey offers new trade terms of 2/10, Net 30. All customers take the discount and pay in 10 days, and sales increase by 20 percent as a result of this discount incentive. If Aunt Donkey earns 22 percent on sales (before discounts) and can reduce their 5% bank loan due to the early payments, should they offer these new discount terms? Support your answer with all relevant calculations.

Reference no: EM132915902

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