1. Partridge Inc. sells about $45 million a year on credit. Good credit and collections performance in the industry result in a 35-day ACP.
a. What is the maximum receivables balance Partridge can tolerate and still receive a good rating with respect to credit and collections?
b. If Partridge is now collecting an average receivable in 40 days, by how much will it have to lower the receivables balance to achieve a good rating?