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hello plz solve this and show your working
annual sale 20 m account recevable 5m and working capital finance by 12% assume 365 day
what is the annual finance cost saving if the managment reduces the collection period to 60 days ?
pleaseThe cost of financing the current receivables is 12% x 5M = $600,000 per annum.
The new average receivables will be 60/365 x 20M = $3287671.
So the new cost of financing = 3287671 x 12% = £394,521 per annum.The annual saving is therefore 600,000 – 394,521 = $205,479.
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