Drake Paper Company sells on terms of net 30 The firms variable cost ratio is 0 80 a If annual credit sales are $20 million and its accounts receivable average 15 days overdue, what is Drakes investment in receivables b Suppose that, as the result of a recession, annual credit sales decline by 10 p...

a Average collection period 30 15 45 days Average daily ...

Drake Paper Company sells on terms of net 30. The firms variable cost ratio is 0.80. a.

Question:

Drake Paper Company sells on terms of “net 30.” The firm’s variable cost ratio is 0.80.
a. If annual credit sales are $20 million and its average 15 days overdue, what is Drake’s investment in receivables?
b. Suppose that, as the result of a recession, annual credit sales decline by 10 percent to $18 million, and customers delay their payments to an average of 25 days past the due date. What will be Drake’s new level of receivables investment?

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...