Question

mpson Orange Juice Company normally takes 30 days to pay far its average daily
credit purchases af $8.400,.:lts average daily sales are $9,900, and it coHects its
accounts irt 34 days.qt .

a. What is its net credit position?

Net credit position: : " S

b. If the firm extends its average payment period from 30 days to 45 days (and all eased
remains the same), v/hat is the firm's new-net credit position? (Negativesanswer
should be indicated by a minnie sign.)

New net credit
position

Answer 1

a) the following information is given

• The average daily sales is $9,900
• the average collection period is 34 days

the accounts receivable will be calculated as under

accounts receivable = average daily sales x average collection period

=$9,900 x 34

=$336,600

• The average daily credit purchases is $8,400
• The average payment period is 30 days

The accounts payable is calculated as below

Accounts payable = average daily credit purchases x average payment period

=$8,400 x 30

=$252,000

the net credit position is calculated below

Net credit position = accounts receivable - accounts payable

=$336,600 - $252,000

=$84,600

the net credit position is $84,600

b)

accounts receivable is $336,600

• The average daily credit purchases is $8,400
• The average payment period is 45 days

The accounts payable is calculated as below

Accounts payable = average daily credit purchases x average payment period

=$8,400 x 45

=$378,000

the net credit position is calculated below

Net credit position = accounts receivable - accounts payable

=$336,600 - $378,000

=-$41,400

the net credit position is - $41,400