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March 26, 2017

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hey...last one please..please...the accelerating colection..please...

Doria's Corporation makes sales of $2,160,000 per annum. The average age of accounts recievable is 30 days. Management considers shortening credit terms by 10 days. Cost of money is 18%

how much will the company save from financing charges?(assume 360-day per year)

.thank you very much!thank you!

  • college finance - ,

    If they are paid 10 days sooner on the annual sales of $2,160,000 per annum, their bank (or bond) financing interest costs are reduced by (10/360)*0.18*$2,160,000 per annum = $10,800. This shows up as a saving.

  • college finance - ,

    thank you very much drwls...^^
    ur the best!

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