Reference no: EM132919557

Mr. X owns a business which operated for the past 20 years. He was assisted by his able wife, Ms. Y who is the cashier/manager of the business. For the past 20 years, they noticed that they have a very slow inventory turnover (more than 300 days). This is too slow relative to the aging of their accounts payable, that is why in most cases, they borrowed money from friends in order to pay their current liabilities. In order to arrest the problem, they decided to relax their credit policy. It bears great effect, their inventories leave the shelf in just 7 days (average). The husband suggested that in order to put balance to the equation, the business must implement aggressive collection policy. The wife opposed, saying that such method will drive away their existing customers. Instead, they will adopt a passive collection policy (meaning; no collection effort, just wait for the debtors to tender payment). Who is correct? The husband or wife? Begin your answer with either the husband or wife; then support it with reasons & explanation.