Problems 22 25 are a series and should be completed in order. 22. Dome Metals...
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Problems 22 25 are a series and should be completed in order.
22. Dome Metals has credit sales of $180,000 yearly with credit terms of net 60 days, which is also the average collection period. Dome does not offer a discount for early payment, so its customers take the full 60 days to pay. What is the average receivables balance? receivables turnover?
23. If Dome offers a 3 percent discount for payment in 18 days, what will the new average receivables balance be? Use the credit sales of $180,000 for your calculation of receivables.
24. What will be the net gain or loss to the firm if Dome offers a 3 percent discount for payment in 18 days, every customer takes advantage of the new terms, and Dome reduces its bank loans, which cost 12 percent, by the cash generated from its reduced receivables? Should it offer the discount? Use the credit sales of $180,000 yearly with credit terms of net 60 days for your calculation.
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