2. In general, what are the primary factors which influence the level of receivables outstanding, and thus which might change and cause a change in the firm’s level of receivables? What factors influence the dollar cost of carrying the receivables?
3. Refer to the monthly sales forecasts given in Table 1. Assume that these amounts are realized and that the firm’s customers pay exactly as predicted.
A. What would the receivables level be at the end of March and at the end of June?
B. What is the firm’s forecasted average daily sales for the first three months of operations? For the entire year?
C. What is the implied DSO at the end of March? At the end of June? (Hint: Complete Table 2.) What is the relationship between the DSO and the average collection period?
D. Does the DSO indicate that the firm’s customers have changed their payment behavior from the first to second quarter? Is DSO a good management tool in this situation? If not, why?
*** These questions are to be answered in paragraph form like you are talking to Texas Rose. You are working as their consultants.
- Attachment 1
- Attachment 2
- Attachment 3
2.The primary factors affecting a firm’s receivable include the credit period, credit standards andthe company’s collection policy. Credit period is the amount of time the company gives the…