Morgan Valley Inc. has current sales of $540,000. All of its sales are on credit and...

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Morgan Valley Inc. has current sales of $540,000. All of its sales are on credit and...

Morgan Valley Inc. has current sales of $540,000. All of its sales are on credit and there is no default. It currently sells on terms of net 30 and has an accounts receivable balance of $50,000.

The company is considering a new credit policy with terms of net 60. Under the new policy, sales are expected to increase to $600,000, and accounts receivable are expected to increase to $100,000.

Part 1

What is the firm's days sales outstanding under the old policy?

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Answer 1

Answer #1

Days sales outstanding under the old policy = ( Current accounts receivables / Current credit sales ) * Days in a year = ( 50000 / 540000 ) * 365

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Answer 2

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