w２b b) Briefly comment on the importance of the assumptions madein the information provided. Nevergreen's standard terms on sales invoices are 30 days, butanalysis has shown that on average customers pay on 45 days.Total sales revenue is £10,000,000 and the company expectsirrecoverable receivables of £200,000.A suggestion has been made to offer a 5% discount to customerspaying when ordering (i.e. O days). It is expected that 20% ofcustomers will take advantage of this. Irrecoverable receivableswould be expected to fall to £100,000 and administrative savingson credit control would amount to £50,000. The averagenumberof days to pay for the remaining 80% of customers would beexpected to increase to 50 days.

Assumption to make that the credit preiod reduced by given the discount . Where the company expected…

Answered: on credit control would amount to…

on credit control would amount to £50,000. The average number of days to pay for the remaining 80% of customers would be expected to increase to 50 days.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter21: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 6P

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