McGriff Dog Food Company normally takes 27 days to pay for average daily credit purchases of $9,530.

Question:

McGriff Dog Food Company normally takes 27 days to pay for average daily credit purchases of $9,530. Its average daily sales are $10,680, and it collects accounts in 32 days.
a. What is its net credit position? That is, compute its and and subtract the latter from the former.
Accounts receivable = Average daily credit sales × Average collection period
Accounts payable = Average daily credit purchases × Average payment period
b. If the firm extends its average payment period from 27 days to 37 days (and all else remains the same), what is the firm’s new net credit position? Has it improved its cash flow?

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