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kaplan page 234: Paisley . Anual cost of financing receivables is given as receivable bal * interest rate $4m*12%= $480k for a co with $20m annual credit sales. My problem is: why not prorate this over the days receivables are outstanding as follows: 4m * 0.12/365* receivables days of 73 = $96k. Please Help
You would be ‘double counting’.
$4M is 73 days of receivables.On average there will be $4M receivables throughout the year (as one customer pays another customer is being sold goods on credit).
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