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Sir, in example 1, would it be double counting if I used post discount credit sales to calculate the new receivables and then again calculate the cost of discount when doing the net cost/benefit?
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Thank you Sir!
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What if the examiner twists the question and says 20% of the customer pays cash and 20% pays within 14 days. Do we calculate new receivables with credit sales(excluding the 20% who pay cash) but for the discount we calculate on 20% of credit sales and 20% of cash sales?
It depends what the current payment profile is. However if it changes then you would include all sales when calculating the new receivables.
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But sir isn’t the formula average receivables/Credit Sales *365??
Sorry – what I wrote was nonsense. For the receivables you would only take the credit sales 🙂
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Thank you Sir for clearing up the confusion!
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