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Essay / Research Paper Abstract
This 8 page paper helps the student answer a case study where a company needs to cut down on the level of accounts receivable and accounts payable. The paper shows how to calculate the average collection periods and payment periods and how different measures may impact on the company performance. All calculation are shown. The bibliography cites 1 sources.
Page Count:
7 pages (~225 words per page)
File: TS14_TEfresh.rtf
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Unformatted sample text from the term paper:
average time it takes to collect the income form the sales made. This is a useful ratio as it can be used to measure credit control. However, where there are
changes noted in the collection period this itself may not be a negative factor and the underling reason needs to be ascertained before judgment is made. There are two ways
of measuring this ratio. The first is creditors divided by sales and then multiplied by the number of days in a year. This will usually be 365, but the question
posed by the student asks for 360 to be used. The alterative method is to take the creditor and divide this by the cost of sales. Using the first method
this gives us the following. Accounts receivable 209,686 Sales 1,179,000 Number of days used 360 ACP 64.02626 When we look at this there is a reason why
these are outstanding so long, there has been a promotion to buy now and pay nothing for two months, As the delaying of paying accounts mans a reduction is working
capital, many customers have been using this, and as such the payment period is very high. Naturally this has a knock on effect. Question 2 The company in this
question is offered a discount by the suppliers for paying for purchases in a rapid fashion. The offer is for payments that are made within ten days to gain a
discount of 2%. To calculate this as a percentage there is an easy calculation. Here we need to look at the total that has been sent on material, also known
as cost of goods., or cost of sales. We also need to ad onto this any use of the goods from inventory. Using these we can take a 2% of
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