ALei Industries has credit sales of $141 million a year. ALei's management reviewed its policy and decided that it wants to maintain an average collection period of 40 days.
a. What is the maximum level of accounts receiable that ALei can carry and have a 40 day average collection period?
b. If ALei's current accounts receivable collection period is 50 days, how musch would it have to reduce its level of accounts receivable in order to achieve its goal of 40 days?