Chapter 3: 11BP_b (page 250)
McGriff Dog Food Company normally takes 27 days to pay for average daily credit purchases of \(9,530. Its average daily sales are \)10,680, and it collects accounts in 32 days.
b. If the firm extends its average payment period from 27 days to 37 days (and all else remains the same), what is the firm’s new net credit position? Has it improved its cash flow?
Short Answer
The net credit position is -$10,850 and it has increased the cash flow of the firm.