Reference no: EM133034687

Question - On a typical day , Park Place Clinic writes $1,000 in checks. It generally takes four days for those checks to clear. Each day the clinic typically receives $1,000 in checks that take three days to clear. What is the clinic's average net float?

Milwaukee Surgical Supplies, Inc., sells on terms of 3/10, net 30. Gross sales for the year are $1,200,000, and the collections department estimates that 30 percent of the customers pay on the tenth day and take discounts, 40 percent pay on the thirtieth day, and the remaining 30 percent pay, on average, 40 days after the purchase. (Assume 360 days per year.)

a. What is the fir m's average collection period?

b. What is the fir m's current receivables balance?

c. What would be the firm's new receivables balance if Milwaukee Surgical toughened up on its collection policy, with the result that all non-discount customers paid on the thirtieth day?

d. Suppose that the firm's cost of carrying receivables was 8 percent annually. How much would the toughened credit policy save the firm in annual receivables carrying expense?