Evaluate the relaxation in credit standards

Reference no: EM132174778

Question: Futon Company has been reviewing its credit policies. The credit standards it has been applying have resulted in annual credit sales of $5 million. Its average collection period is 30 days, with a bad debt/loss ratio of 1 percent. Futon is considering a reduction in its credit standards. As a result, it expects incremental credit sales of $400,000, on which the average collection period (ACP) would be 60 days and on which the bad debt/loss (BDL) ratio would be 3 percent. The variable cost ratio (VCR) to sales for Futon is 70 percent. The required return on investment in receivables is 15 percent. Evaluate the relaxation in credit standards that Futon is considering. (Use 0.04 percent per 365 days/year.)

Reference no: EM132174778

Questions Cloud

Expected phenotypic and genotypic ratio of the f1 generation : When you cross a homozygous recessive genotype with a homozygous dominant genotype, what is the expected phenotypic and genotypic ratio of the F1 generation?

What proportion of coffee drinkers have or morecups per day : What can you conclude about the relationship between the two variables - What can you conclude about the relationship between the two variables

Which included valuable paintings and antique furniture : Joanna's aunt recently died, and in her Will Joanna was left the house and its contents, which included valuable paintings and antique furniture.

How are they different from dihybrid crosses : What are monohybrid crosses, how are they different from dihybrid crosses?

Evaluate the relaxation in credit standards : Futon Company has been reviewing its credit policies. The credit standards it has been applying have resulted in annual credit sales of $5 million.

Exercise on pulmonary volumes and capacities : Briefly explain the effects of exercise on pulmonary volumes and capacities.

Investigative pcr reaction to screen human tissue samples : A research associate working for Intragene Therapeutics prepares an investigative PCR reaction to screen human tissue samples for specific mutations.

What will be walnut average cash balance : Walnut Industries projects that annual cash usage of $3.75 million will occur uniformly throughout the forthcoming year. Walnut plans to meet these demands.

Discuss the abbasid revolution : It was said by a Sufi Sheikh, "the land of Iraq is sacred and that whoever touches it soil departs changed." This was certainly true of the Mongols.

User Account

All Pages