East lansing appliances expects to have sales

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Reference no: EM132050681

East Lansing Appliances (ELA) expects to have sales this year of $15 million under its current credit policy. The present terms are net 40; the days sales outstanding (DSO) is 50 days; and the bad debt loss percentage is 6 percent. Since ELA wants to improve its profitability, the treasurer has proposed that the credit period be shortened to 20 days. This change would reduce expected sales by $500,000, but it would also shorten the DSO on the remaining sales to 35days. Expected bad debt losses on the remaining sales would fall to 5percent. The variable cost percentage is 55 percent, and the cost of capital is 12 percent. (Please only enter number. For example, if your answer is $260,500, enter 260500)

Reference no: EM132050681

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