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?
See attached file.
For your review, I have attached a formatted MS Excel ...
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.