Question 1: Darla's Cosmetics has annual credit sales of $1,440,000 and an average collection period of 45 days in 2008. Assume a 360 day year.
Question 2: What is the company's average accounts receivable balance? Accounts receivable are equal to the average daily credit sales times the average collection period.
Question 3: If accounts receivalbe change to $200,000 in the year 2009, while credit sales are $1,800,000, should I assume the firm committed to a more lenient credit policy?