A lower number of days sales outstanding is not the least likely effect of this change in credit terms. Receivables will be collected more quickly because customers will have an incentive to pay within the 10 days to receive a 2% discount. The number of days sales outstanding will likely decrease as a result.
An increase in short-term borrowing is the least likely effect of this change in credit terms. Northville's short-term borrowings will probably decrease, because receivables will be collected more quickly. Customers will have an incentive to pay within the 10 days to receive a 2% discount.
Shortening of the cash conversion cycle is not the least likely effect of this change in credit terms. A shorter cash conversion cycle is a likely effect, because receivables will be collected more quickly. Customers will have an incentive to pay within the 10 days to receive a 2% discount.
An increase in sales is not the least likely effect of this change in credit terms. It is possible that some additional sales would be made to customers who would be planning to take advantage of the 2% discount by paying within 10 days. Therefore, an increase in sales could be a likely effect.
|
