Question

In: Finance

Warner Sports changed its credit terms from 2/10, n/30 to 1/10, n/45.  What will most likely happen...

Warner Sports changed its credit terms from 2/10, n/30 to 1/10, n/45.  What will most likely happen to its accounts receivable collection period?

a.

It will increase
b.

It will decrease
c.

It will remain the same
d.

The answer depends on the amount customers owe

Solutions

Expert Solution

Answer: ( A ) it will increase

In the first case the credit period is 30 days and discount on issue of fast payment with in 10 days is 2%.

In second case the credit period has increased to 45 days but the discount on issue of fast payment with in 10 days is decreased to 1%.

So the accounts receivables collection period is increased due to decreased in discount.

jeff jeffy answered 2 years ago
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