| Course | AC298 Associate's Capstone in Accounting |
|---|---|
| Unit | Unit 8 |
| Paper type | Recommendation memo |
| Length | About 750 words, 5 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | Associate of Applied Science in Accounting |
| Updated | October 2026 |
Free sample paper for AC298 Unit 8
A Smaller Limit on 30-Day Terms, Not 60 Days: A Unit 8 Recommendation Memo on a Contractor's Credit Request
[Student Name]
Purdue University Global
AC298: Associate's Capstone in Accounting
Unit 8 Recommendation Memo
[Instructor Name]
[Date]
Kiln Road Tile & Flooring, the contractor and all figures are composite; the textbook and the ratio and cash studies cited are real.
Header
To: Teresa Vance, owner From: Capstone accountant Date: January 20 Subject: Brennan Floors' request for 60-day terms
Recommendation
Offer Brennan Floors a $15,000 credit limit on our standard 30-day terms, with a review after six months of on-time payment. Do not extend 60-day terms at this time, and tell Brennan when the request will be reviewed.
Reasons
1. Cash is already thin. The store ended the year with $6,510 in cash (B-1 detail), less than two weeks of payroll and rent. Cash alone covers under a third of current liabilities (ratio 2, quick ratio 1.98).
2. Contractors already pay late. Contractor accounts are collected in about 40 days against 30-day terms (ratio 6 reading). A 60-day account would likely run 70 or more.
3. Inventory already ties up money. Tile sits about 77 days before it sells (ratio 5). Brennan's orders would mean buying more tile up front, financed by the store until Brennan pays.
4. The margin is good but thin after expenses. Gross margin is 38.5 percent (S-3), but net margin is 4.7 percent (ratio 4). A single $25,000 account that defaults would erase most of a year's profit.
5. The owner's equity is falling. Withdrawals of $48,000 exceeded net income of $31,460 (S-4, S-5), so the business cannot easily absorb a large receivable.
A $25,000 account on 60-day terms would hold roughly four times the store's year-end cash in a single customer's hands for two months, at a time when cash covers less than two weeks of fixed costs.
What the Store Gains From the Alternative
A $15,000 limit on 30-day terms keeps Brennan as a customer and still lets the store earn its 38.5 percent gross margin on a substantial account. At its current pace, Brennan would reorder monthly within the limit, so sales are not lost; the store simply avoids financing a second month of them.
The Cash Effect, Worked Out
Brennan expects to buy about $12,000 of tile a month at our prices. On 60-day terms, with the contractor habit of paying ten days late, the store would carry roughly $28,000 of Brennan's receivables at any time, on top of the $39,200 already outstanding. The tile behind those sales costs about $7,400 a month at the store's 61.5 percent cost of goods sold ratio, and the supplier must be paid within 30 days to keep the discount. On 30-day terms with a $15,000 limit, the store's exposure is capped, Brennan's balance turns over monthly, and the store's own supplier payments line up with Brennan's collections.
What Would Change This Advice
Three developments would justify revisiting the request in six months. Brennan pays every invoice within 30 days for two consecutive quarters. The store's year-end cash rises above one month of fixed costs, about $15,000. The bank renews the store's line of credit, so a slow-paying account would not force the store to delay its own suppliers. If all three occur, a higher limit on 45-day terms would be a reasonable middle step.
Risks and Safeguards
Brennan may take its business elsewhere. To reduce that risk, consider a 1 percent reduction for any invoice Brennan settles inside ten days, which costs less than the interest the store would pay on its line to carry the receivable. Ask for a credit application and two trade references, and add Brennan to the monthly aging the store will now run. If Brennan's balance passes 45 days at any point, new orders should wait until the oldest invoice is paid, a rule the counter staff can apply without calling the owner. Putting the rule in writing now avoids an awkward conversation later, because both sides will know the limit before the first order ships.
Evidence Behind the Approach
Research on small businesses has found that the median firm holds only about 27 days of cash outflows (Farrell & Wheat, 2016), and liquidity measures have long been among the earliest warning signs of financial trouble (Beaver, 1966). Kiln Road's liquidity looks strong only because of inventory (Franklin et al., 2019), which is why the quick ratio and cash, not the current ratio of 6.01, drive this recommendation.
References
Beaver, W. H. (1966). Financial ratios as predictors of failure. Journal of Accounting Research, 4, 71-111. https://doi.org/10.2307/2490171
Farrell, D., & Wheat, C. (2016). Cash is king: Flows, balances, and buffer days. JPMorgan Chase Institute. https://www.jpmorganchase.com/institute/all-topics/business-growth-and-entrepreneurship/report-cash-flows-balances-and-buffer-days
Franklin, M., Graybeal, P., & Cooper, D. (2019). Principles of accounting, volume 1: Financial accounting. OpenStax. https://openstax.org/details/books/principles-financial-accounting
AC298 Unit 8 instructions, in plain terms
The eighth AC298 unit asks for a memo recommending an action to the capstone business's owner, supported by the figures from earlier units. Write it as a business memo whose subject line names the request. Put the recommendation first, in one or two sentences. Then give the reasons, each tied to a figure from the statements or ratio analysis with its reference. Work out the effect of the request on cash or profit where it decides the answer. Explain what the business gains from the recommended alternative and how to manage its risks. State what would change the advice. Do not introduce new financial figures beyond those the prompt supplies. Keep the memo to about two pages. Cite research and course sources in APA 7.
Inside the AC298 Unit 8 example
The sample's header addresses the owner about the contractor's request. The recommendation section offers a $15,000 limit on 30-day terms with a six-month review. Five numbered reasons cite cash, the quick ratio, the collection period, inventory days, margins and the withdrawals, each by reference. The highlighted sentence compares the requested exposure with the store's cash. A section shows what the store keeps under the alternative. The worked cash effect estimates Brennan's balance under each term. A section names three developments that would justify revisiting. Safeguards include an early-payment reduction, a credit application and a 45-day order hold, and a closing paragraph cites cash buffer and ratio research.
Where the points sit in the AC298 Unit 8 rubric
Recommendation memos are graded on a clear recommendation, accurate support and sound judgment. Every number should trace to an earlier unit or the prompt, and graders check the references. Reasons should be specific to the business, not general credit principles. Working out the cash effect shows analytical skill. Offering an alternative that keeps the customer shows business sense. Conditions for revisiting the decision and practical safeguards earn judgment credit. Memo format and concise writing count. APA 7 citations for supporting research complete the assessment, and a memo that leads with its answer usually scores above one that builds to it.
AC298 Unit 8 help: mistakes that cost points
Many recommendation memos bury the answer at the end. Others cite ratios without saying why they matter to this request. New figures appear that were never computed earlier, which the AC298 rubric often penalizes. The current ratio is used as proof of liquidity when inventory inflates it. The memo refuses the request without offering an alternative. Safeguards are missing, so even a sound limit has no rule for what happens when the account runs late. A memo that names the order hold or credit review in advance gives the owner something she can actually enforce. If your capstone's statements and ratios are done and you need the memo that applies them, a writer can draft it with every figure referenced.
Get an AC298 Unit 8 example written to your instructions
Describe the decision your owner or manager faces, attach the statements and ratios you have already submitted, and include the Unit 8 prompt and rubric. Built only on those figures, a free first memo is back in 24-48h with each number referenced to its source. Nothing outside your record is added unless the prompt itself supplies it. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
More AC298 papers and Associate of Applied Science in Accounting samples
- AC298 Unit 1: Capstone Weak Spot Post
- AC298 Unit 2: Capstone Proposal and Scope
- AC298 Unit 3: December Transaction Recording Set
- AC298 Unit 4: Year-End Adjusted Statement Package
- AC298 Unit 5: Eight-Ratio Analysis
- AC298 Unit 6: Ethics Scenario Response
- AC298 Unit 7: Seminar Progress Check Script
- AC298 Unit 9: Career Portfolio Piece
- AC298 Unit 10: Capstone Presentation
AC298 Unit 8 questions, answered
Can the memo use figures that were not in my earlier submissions?
Only figures the prompt itself supplies, such as the size of the request being evaluated. Everything about the business's own position should come from the statements and ratios already submitted, cited by reference. If an earlier figure was wrong, correct it openly in both places rather than quietly using a different number in the memo.
How long should a recommendation memo be?
One to two pages is typical, and shorter is often stronger. The recommendation fits in the first paragraph, three findings carry the evidence, and one worked estimate makes the key risk concrete. Anything beyond that usually belongs in an appendix. Owners read memos to decide, and a memo that reads like an essay is often marked as the wrong format.
Should the memo recommend what the owner wants to hear?
It should recommend what the figures support and say so plainly, including when that disappoints. The sample softens delivery, not substance: it offers a limited yes rather than a flat no, and it names the condition under which longer terms would make sense. Advice that follows the owner's preference against the numbers usually loses analysis credit.
Where can I find a free AC298 Unit 8 sample paper?
A complete AC298 Unit 8 recommendation memo is on this page, advising a tile and flooring store to offer a contractor a $15,000 limit on 30-day terms instead of 60 days, with every figure referenced.
Why does the AC298 Unit 8 sample ignore the strong current ratio?
The current ratio of 6.01 is high mainly because of $89,900 of inventory. Cash of $6,510 and the quick ratio of 1.98 show the store's real ability to carry a slow account.