Aziz Industries Has Sales of $100,000 and Accounts Receivable of $11,500

question 23

Multiple Choice

Aziz Industries has sales of $100,000 and accounts receivable of $11,500, and it gives its customers 30 days to pay.The industry average DSO is 27 days, based on a 365-day year.If the company changes its credit and collection policy sufficiently to cause its DSO to fall to the industry average, and if it earns 8.0% on any cash freed-up by this change, how would that affect its net income, assuming other things are held constant?

• A) $267.34
• B) $281.41
• C) $296.22
• D) $311.81
• E) $328.22

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Definitions:

Ledger

A book or digital record used to track all financial transactions and balances for a company's accounts.

Accounting Tool

Software or systems utilized by accountants or businesses to record, analyze, and report financial information.

Assets

Resources controlled by a business as a result of past events and from which future economic benefits are expected to flow to the business.

Liabilities

Financial obligations or debts that a company owes to others, which must be settled over time.