As Miller Manufacturing Company”s internal auditor, you are reviewing the company”s credit policy. The following information is from Miller”s annual reports for 2008, 2009, 2010, and 2011:
|
2008 |
2009 |
2010 |
2011 |
|
|
Nets accounts receivable |
$ |
$ 2,160,000 |
$ 2,700,000 |
$ 3,600,000 |
|
1,080,000 |
||||
|
Net sales |
10,800,000 |
13,950,000 |
1,71,00,000 |
1,98,00,000 |
Management has asked you to calculate and analyze the following in your report: a. If cash sales account for 30 percent of all sales and credit terms are always 1/10, n/60, determine all turnover ratios possible and the number of days” sales in accounts receivable at all possible dates. (The number of days” sales in accounts receivable should be based on year-end accounts receivable and net credit sales.)
b. How effective is the company”s credit policy