During 2008, the difference in yield (the yield spread)between three-month AA-rated financial commercialpaper and three-month AA-rated nonfinancial commercial paper steadily increased from its usual level ofclose to zero, spiking to over a full percentage point atits peak in October 2008. What explains this suddenincrease?

During 2008, the difference in yield (the yield spread)between three-month AA-rated financial commercialpaper and three-month AA-rated nonfinancial commercial paper steadily increased from its usual level ofclose to zero, spiking to over a full percentage point atits peak in October 2008. What explains this suddenincrease?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 2P

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Brown Corporation had average days of sales outstanding of 19 days in the most recent fi scal year. Brown wants to improve its credit policies and collection practices and decrease its collection period in the next fi scal year to match the industry average of 15 days. Credit sales in the most recent fi scal year were $300 million, and Brown expects credit sales to increase to $390 million in the next fi scal year. To achieve Brown’s goal of decreasing the collection period, the change in the average accounts receivable balance that must occur is closest to: A . +$0.41 million.
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