Problem:
My management team is concerned with our company's credit policy being too lax and wants to tighten it up. We want to enforce a stronger credit policy and lower our DSO to 25 days. We expect to lose some credit sales because of the stronger policy and believe annual sales will decline by 5%. Can someone tell me how much will our accounts recivable decrease by as a result of our new policy?
We have $2,000,000 in accounts receivable, which accounts for half of our current assets and our current DSO is 38 days. We have $6,000,000 in net fixed assets.