Question

After discussing the issue with you and others in the Finance department, the manager decided to change the payment terms for Accounts Receivable. The payment time remained at 14 days, but the penalty for late payments was increased.

After about 3 months under the new payment terms, you asked the manager to collect a second stratified random sample. The data is presented in the second column of the worksheet (see the tab titled, “Data – Case #2) under the Heading “New Payment Terms.”

Conduct the appropriate analysis and present your findings, conclusions and recommendations to the manager. Are the new payment terms effective? Provide your discussion below.

	Old	New
	Payment	Payment
	Times	Times
	(in days)	(in days)
Week 1	14	12
	13	13
	11	11
	14	14
	13	15
	19	14
Week 2	12	16
	18	14
	13	12
	16	15
	15	16
	17	13
Week 3	15	14
	16	12
	18	16
	16	13
	13	18
	26	19
Week 4	27	21
	25	20
	23	22
	26	23
	23	19
	27	21
Week 5	21	14
	12	11
	14	15
	15	13
	13	14
	11	12
Week 6	14	11
	19	17
	19	18
	18	15
	14	17
	19	17
Week 7	18	16
	22	21
	20	19
	23	17
	24	21
	22	24
Week 8	28	18
	26	20
	25	19
	27	22
	29	25
	28	21

Answer 1

Use 2-sample t-test to test whether the average payment time has reduced in the new system

H₀: Population average payment time before = Population average payment time after
H₁: Population average payment time before > Population average payment time after

B A C D F G Old Payment New Paymentt-Test: Two-Sample Assuming Equal Variances ? X Times Times 1 Input OK Variable 1 Range: 2 Week 1 14 12 $B$1:$B$49 Cancel 13 13 Variable 2 Range: 3 $C$1:$C$49 11 11 4 Help Hypothesized Mean Difference: 0 14 14 5 abels 13 15 6 Alpha: 0.05 19 14 7 8 Week 2 12 16 Output options 18 14 9 Qutput Range: 13 12 10 O New Worksheet Ply: 16 15 11 New Workbook 15 16 12 17 13 13 14 Week 3 15 14 16 12 15 18 16 16 . T LL LLI

Results

t-Test: Two-Sample Assuming Equal Variances
	Old Payment Times	New Payment Times
Mean	18.97916667	16.66666667
Variance	29.42508865	13.97163121
Observations	48	48
Pooled Variance	21.69835993
Hypothesized Mean Difference	0
df	94
t Stat	2.432057888
P(T<=t) one-tail	0.00845356
t Critical one-tail	1.661225855
P(T<=t) two-tail	0.016907119
t Critical two-tail	1.985523442

Note that the 't Stat' value is greater than the 't Critical one-tail' value. So, we reject the null hypothesis at 95% confidence level and assert that Population average payment time after < Population average payment time before and the proposal seemed to have worked in that the reduction in payment time is statistically significant.

Note: The t-test was conducted using the assumption of equal variances.