In order to enhance sales from their present annual $35 million, ABC Company, a retailer, is considering more liberal credit standards. Presently, the firm has an average collection period of 30 days. It believes that with increasingly liberal credit standards, the following will result:
                                                                                         Credit Policy
                                                                                           A           B          C           D
Enhance in sales from previous level (in millions)                     $6.5      $4.8      $2.6       $1.8    
Average collection period for incremental sales (days)               45         60        90         150
Bad-Debt losses on incremental sales                                     3%         4%       6%         9%

The prices of its products average $30 per unit, and variable costs average $26 per unit. If the company has a before-tax opportunity cost of 20%, which credit policy should be pursued?

Posted Date: 3/15/2013 3:54:52 AM | Location : United States

Ask an Expert

Related Discussions:- Liberal credit standards, Assignment Help, Ask Question on Liberal credit standards, Get Answer, Expert's Help, Liberal credit standards Discussions

Write discussion on Liberal credit standards
Your posts are moderated

Write your message here..

Related Questions

Foreign corporation, Foreign Corporation - A corporation that isn't organiz... Foreign Corporation - A corporation that isn't organized under the laws of ones territories or states. Taxing of foreign corporations relies on whether corporation has Nexus or eff

What is accounting, What is accounting? Accounting is concerned with an... What is accounting? Accounting is concerned with analysing, collecting as well as communicating financial information. Purpose is to help people who use this info to make more

Accounting equation, Can anyone here help me in this question ?? Kindly tel... Can anyone here help me in this question ?? Kindly tell how can we solve it Mr. “A” starts a new business. Before to start the business operation, he has purchased vehicle Rs. 1,

What do you mean by grant date in stock option, Q. What do you mean by Gran... Q. What do you mean by Grant date in Stock Option? Grant date - The date at which an employee and an employer reach a mutual understanding of key terms and conditions of a shar

Compute the effect on retail sales, Molina Medical Supply Company is trying... Molina Medical Supply Company is trying to decide whether or not to continue distributing hospital supplies. The following information is available for Molina's business segments.

Prepare the statement of cash flows, The comparative balance sheets for 201... The comparative balance sheets for 2013 and 2012 are given below for Surmise Company. Net income for 2013 was $80 million. SURMISE COMPANY Comparative Balance Sheets December 31, 2

Basic interest rate and maximum interest rate, Suppose a risk neutral agent... Suppose a risk neutral agent has $100,000 today that he wants to save for one year. Compare the following two savings plans. Bank A offers a standard savings account with 4% p.a

Acoounts, The book of Deven Verma could not be tallied. The accountant tran... The book of Deven Verma could not be tallied. The accountant transferred the difference of Rs. 1,270 in the suspense account on the debit side. The following mistakes were found la

Determine the goodwill calculation, A company purchased 16 million shares (... A company purchased 16 million shares (representing an 80% controlling interest) in another company on 1 July 2010. The terms of the purchase were as follows:    1 share in

Prepare a surprise county construction fund balance sheet, During FY 2014, ... During FY 2014, the voters of Surprise County approved construction of a $21 million police facility and an $11 million fire station to accommodate the county's population growth.