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Essence of Skunk Fragrances: Effect on Accounts Receivable

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Essence of Skunk Fragrances, Ltd. sells 5600 units of its perfume collection each year at a price per unit of $425. All sales are on credit with terms of 1/10, net 40. The discount is taken by 60 percent of the customers, by its main competitor, Sewage Spray. Essence of Skunk is considering a change in its credit policy to terms of 2/10, net 30 to preserve its market share. How will this change in policy affect accounts receivable?

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Solution Summary

I have attached a formatted MS Excel spreadsheet, which highlights the effect of a pending change in discount policy on a firm's accounts receivable balance. I have also included in this post a reference source which might be useful to you in gaining a better understanding of the subject matter.

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