Answered

Garcia industries has sales of $207,500 and accounts receivable of $18,500, and it gives its customers 25 days to pay. The industry average dso is 27 days, based on a 365-day year. If the company changes its credit and collection policy sufficiently to cause its dso to fall to the industry average, and if it earns 8. 0% on any cash freed up by this change, how would that affect its net income, assuming other things are held constant? assume all sales to be on credit. Do not round your intermediate calculations.



Answer :

arshikhan8123

Rates: 8%

Sales: 207,500

A/R: 18,500

Days in Year 365

Sales/Day: 568.50

DSO: 40

Industry DSO: 27

(x / 207,500) x 365 = 27

Solve for x = 15,349.31

x = This is the amount Accounts Receivable needs to be lowered to.

18500 - 15,349.31 = 3,150.69 decrease in Accounts Receivable

3,150.69 x 8% = 252.05 Interest earned and addition to net income.

Net income refers to the income of an individual or business after deducting expenses, allowances and taxes. In commerce, net income is what is left in the business after all expenses such as salaries and wages, cost of goods and raw materials, and taxes.

Is Net income the Same as Profit?

Profit simply means the remaining income minus expenses. It exists at multiple levels, depending on the type of cost that is deducted from the revenue. Net income, also known as net profit, is a single number that represents a particular type of profit. Net income is the famous last line of financial statements.

Learn more about Net income here:- brainly.com/question/11110287

#SPJ4

Other Questions