the management of XYZ Co has annual credit sales of $20m and accounts receivable of $4m. working capital is financed by an overdraft at 12% interest per year, assume 3665 days in a year. what is the annual finance cost saving if the management reduces the collection period to 60 days?
the answer is that if the credit period is reduced to 60 days, receivable will become (30/365)x $20m=$3,287.671.
my question is why they use 30 days?
many thanks
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finance cost saving
9y ago#1From what you have written, I have no idea why they have used 30 days!
I really need to see the whole question. If it is in the BPP Revision Kit then please tell me which question, or, if it is a past exam question, then please tell me which exam.
sorry i didn't write completely, the question is the same which i wrote as above, the question comes from BPP practice and revision Kit (for exam from 1 September 2015 to 31 August 2016) mock exam 1 section 1 question number 12.
many thanks
i think it is book print mistake, if change to 60 days, the answer =3,287,671
many thanks
9y ago#4You are right - it is a typing mistake.
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