The general manager of Liberty Inc. issued a challenge to his managers. He wanted to decrease the
Question:
Liberty Inc.
Financial Statement Information
December 31, 2017
Cash............ $ 65,000
Average accounts receivable..... 375,000
Average inventory........ 610,000
Revenue.......... 2,839,730
Cost of sales.......... 1,535,517
Required:
Suppose that Liberty’s managers were able to decrease the collection period for receivables to 42 days and the holding period for inventory to 130 days. What would have been the impact on the company’s cash on December 31, 2017? (Determine the average amount of inventory and accounts receivable that would be needed in 2017 to achieve the targets.) What would be some methods Liberty could use to achieve the targets set by the general manager?
Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
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