What is the net credit position

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Reference no: EM131787732

Question: McGriff Dog Food Company normally takes 20 days to pay for average daily credit purchases of $9,000. Its average daily sales are $10,000, and it collects accounts in 25 days.

a. What is its net credit position? That is, compute its accounts receivable and accounts payable and subtract the latter from the former.

Account receivable = Average daily credit sales x Average collection period

Account payable = Average daily credit purchases x Average payment period

b. If the firm extends its average payment period from 20 days to 32 days (and all else remains the same), what is the firm's new net credit position? Has it improved its cash flow?

Reference no: EM131787732

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