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What is the advantage of the decision

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Reference no: EM132757278

The Sales Director of Go Company suggests that certain credit terms be modified. He estimates the following effects:

  • Sales will increase by at least 20%.
  • Accounts receivable turnover will be reduced to 8 times from the present turnover of 10 times.
  • Bad debts, now at 1% of sales will increase to 1.5% Sales before the proposed changes is at P900,000. Variable cost ratio is 55% and desired rate of return is 20% Fixed expenses amount to P150,000.

Problem1 : What is the advantage (disadvantage) of this decision?

Reference no: EM132757278

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