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P co intends to offer 1.5% discount to customers who pay within 20 days . P co currently offers a 45 day credit period but the customer takes an average of 60 days to settle their debt
P co estimates that 40% of its customer will take advantage of the early settlement discount while the rest will stick to their current payment pattern
What will be the reduction in average receivable days if the early settlement discount is offered?
Answer is 16 days.
I don’t understand pls help
Reduction in average receivable days = (40% * 20) + (60% * 60) = 8 + 36 = 44 days
From an average of 60 days
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