Due to the extent credit period offered to customers the

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Reference no: EM13616148

There change for this company is expected to increase from 4,000,000 to 4,800,000. 80% of sales increase are from new customers. 20% from existing customers. Days sales in inventory will decline from 100 to 45 days and sales will be offset by most of the additional costs of accounts payable associated with increased purchases.

Due to the extent credit period offered to customers, the average colletion period will increase from 45 to 90 days and bad bedt will increase from 1% to 2%of sales. Variable costs will continue to be 80% of sales. the company's inventory costs average$.26 per one dollar of inventory per year. cost to carry accouts receivable average 16%.

What would you advice the firm regarding the proposed change in its credit terms?

Reference no: EM13616148

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