Explain optimum credit policy

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How would you define the term Optimum Credit Policy? Also explain the terms Credit Standards, and Ageing Analysis. (10 SelWel Lid currently offers credit terms of 2/10 net 45 to customers. Last year SelWel clocked sales of Rs 200 cr. Average Collection Period (ACP) was 25 days, Variable cost ratio is 65%, and fixed cost is Rs 15 cr. 25% of the customers paid up e get benefit of the cash discount. The CEO has asked the Sales team to take aggressive sales targets next year. The Sales Manager of SelWel has estimate by offering higher discount terms of 3/10 net 45, sales will increase by 20%, ACP will reduce by 7 days, and 60% of custom will go in for cash discount. Tax rate for the company is 30%, and carrying cost of receivables is 14%.

Reference no: EM133115060

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Explain optimum credit policy : How would you define the term Optimum Credit Policy? Also explain the terms Credit Standards, and Ageing Analysis. (10 SelWel Lid currently offers credit terms
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