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What is the average receivables balance

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Question - Pierce Produce has credit sales of $800,000 yearly with customers paying on average in 60 days. Pierce Produce does not currently offer a discount for early payment.

Required -

1. What is the average receivables balance?

2. Assume Pierce Produce offers new trade terms of 2/10, Net 30. All customers take the discount and pay in 10 days, and sales increase by 10 percent as a result of this discount incentive. If Pierce Produce earns 20 percent on sales (before discounts) and can reduce their 4% bank loan due to the early payments, should they offer these new discount terms?

Reference no: EM133139213

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