Describe accounts receivables

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Describe Accounts Receivables

Collins Office Supplies is considering a more liberal credit policy to increase sales, but expects that 9 percent of the new accounts will be uncollectible. Collection costs are 5 percent of new sales, production and selling costs are 78 percent, and accounts receivable turnover is five times. Assume income taxes of 30 percent and an increase in sales of $80,000. No other asset buildup will be required to service the new accounts.

Should Collins liberalize credit if a 15 percent after tax return on investment is required?

Assume Collins also needs to increase its level of inventory to support new sales and that inventory turnover is four times

Reference no: EM1317392

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