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What is the average receivables balance

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Question - Sweet Shop has credit sales of $450,000 yearly with customers paying on average in 70 days. Sweet Shop does not currently offer a discount for early payment.

Required -

1. What is the average receivables balance?

2. Assume Sweet Shop offers new trade terms of 2/10, Net 30. All customers take the discount and pay in 10 days, and sales increase by 18 percent as a result of this discount incentive. If Sweet Shop earns 20 percent on sales (before discounts) and can reduce their 4% bank loan due to the early payments, should they offer these new discount terms?

Reference no: EM133154364

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