Toys for Big Boys sells snowmobiles, personal watercraft, ATVs, and the like. Recently, the credit manager of

Question:

Toys for Big Boys sells snowmobiles, personal watercraft, ATVs, and the like. Recently, the credit manager of Toys for Big Boys retired. The sales staff threw him a big retirement party-they were glad to see him go because they felt his credit policies restricted their selling ability. The sales staff convinced management that there was no need to replace the credit manager since they could handle this responsibility in addition to their sales positions.
Management was thrilled at year end when sales doubled. However, quadrupled and cash flow halved. The company's average collection period increased from 30 days to 120 days.
Instructions
In a memo to management, explain the financial impact of allowing the sales staff to manage the credit function. Has the business assumed any additional credit risk? What would you recommend the company do to better manage its increasing 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...