CFA Level 1
Corporate Finance

Accounts Receivable Reduction Calculation

Medium Working Capital Management Accounts Receivable Management

Anita's Auto Supplies has experienced a significant increase in its sales over the past year. As a result, her accounts receivable (AR) has also increased. Currently, the firm's accounts receivable stand at $300,000, and its annual credit sales are $3,000,000. Anita is considering implementing a more stringent credit policy to reduce AR and improve cash flow. She is aiming for a reduction in AR of 20% within the next year.

What would be the expected accounts receivable balance if Anita achieves her target reduction?

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