After discussing the issue with you and others in the Finance department, the manager decided to change the payment terms for Accounts Receivable. The payment time remained at 14 days, but the penalty for late payments was increased.
After about 3 months under the new payment terms, you asked the manager to collect a second stratified random sample. The data is presented in the second column of the worksheet (see the tab titled, “Data – Case #2) under the Heading “New Payment Terms.”
Conduct the appropriate analysis and present your findings, conclusions and recommendations to the manager. Are the new payment terms effective? Provide your discussion below.
Old | New | |
Payment | Payment | |
Times | Times | |
(in days) | (in days) | |
Week 1 | 14 | 12 |
13 | 13 | |
11 | 11 | |
14 | 14 | |
13 | 15 | |
19 | 14 | |
Week 2 | 12 | 16 |
18 | 14 | |
13 | 12 | |
16 | 15 | |
15 | 16 | |
17 | 13 | |
Week 3 | 15 | 14 |
16 | 12 | |
18 | 16 | |
16 | 13 | |
13 | 18 | |
26 | 19 | |
Week 4 | 27 | 21 |
25 | 20 | |
23 | 22 | |
26 | 23 | |
23 | 19 | |
27 | 21 | |
Week 5 | 21 | 14 |
12 | 11 | |
14 | 15 | |
15 | 13 | |
13 | 14 | |
11 | 12 | |
Week 6 | 14 | 11 |
19 | 17 | |
19 | 18 | |
18 | 15 | |
14 | 17 | |
19 | 17 | |
Week 7 | 18 | 16 |
22 | 21 | |
20 | 19 | |
23 | 17 | |
24 | 21 | |
22 | 24 | |
Week 8 | 28 | 18 |
26 | 20 | |
25 | 19 | |
27 | 22 | |
29 | 25 | |
28 | 21 |
Use 2-sample t-test to test whether the average payment time has reduced in the new system
H0: Population average payment time before =
Population average payment time after
H1: Population average payment time before >
Population average payment time after
Results
t-Test: Two-Sample Assuming Equal Variances | ||
Old Payment Times | New Payment Times | |
Mean | 18.97916667 | 16.66666667 |
Variance | 29.42508865 | 13.97163121 |
Observations | 48 | 48 |
Pooled Variance | 21.69835993 | |
Hypothesized Mean Difference | 0 | |
df | 94 | |
t Stat | 2.432057888 | |
P(T<=t) one-tail | 0.00845356 | |
t Critical one-tail | 1.661225855 | |
P(T<=t) two-tail | 0.016907119 | |
t Critical two-tail | 1.985523442 |
Note that the 't Stat' value is greater than the 't Critical one-tail' value. So, we reject the null hypothesis at 95% confidence level and assert that Population average payment time after < Population average payment time before and the proposal seemed to have worked in that the reduction in payment time is statistically significant.
Note: The t-test was conducted using the assumption of equal variances.
After discussing the issue with you and others in the Finance department, the manager decided to...
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