Problem: Trade Credit and Receivables. A firm offers terms of 2/15, net 30. Currently, two-thirds of all customers take advantage of the trade discount; the remainder pay bills at the due date.
Q1. What will be the firm’s typical value for its accounts receivable period?
Q2. What is the average investment in accounts receivable if annual sales are $20 million?
Q3. What would likely happen to the firm’s accounts receivable period if it changed its terms to 3/15, net 30?