The McCollough Company has a variable operating cost ratio of 70 percent, its cost of capital is 10 percent, and current sales are $10,000 All of its sales are on credit, and it currently sells on terms of net 30 Its accounts receivable balance is $1,500 McCollough is considering a new credit policy with terms of net 45 Under the new policy, sales will increase to $12,000, and accounts receivable will rise to $2,500 Compute the DSO under the existing policy and the proposed policy

Question: The McCollough Company has a variable operating cost ratio of 70 percent, its cost of capital is 10 percent, and current sales are $10,000. All

The McCollough Company has a variable operating cost ratio of 70 percent, its is 10 percent, and current sales are $10,000. All of its sales are on credit, and it currently sells on terms of net 30. Its balance is $1,500. McCollough is considering a new credit policy with terms of net 45. Under the new policy, sales will increase to $12,000, and will rise to $2,500. Compute the DSO under the existing policy and the proposed policy.

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