Sales to justify introduction of the new credit policy

Assignment Help Financial Management

Reference no: EM13932656

Dickson City Company has annual sales of $5 million, while the cost of goods sold is $3.2 million. All sales are made on a cash basis. The owner of Dickson has come up with the plan of giving credit to the customers. He believes that this will increase the sales by 25% without increasing any of the fixed costs. He thinks that 20% of the customers will pay within 30 days, 40% within 60 days, 37% within 90 days, and 3% of the customers will default on the sales. The cost of capital to Dickson is 12%.

(B) The manager of the firm doubts whether the sales will actually increase by 25% as a result of this strategy. Find the minimum increase in sales to justify introduction of the new credit policy.

Reference no: EM13932656

Questions Cloud

How might outlining help to develop understanding : Describe your approach to breaking down information into component parts to better understand the characteristic of a statement, concept or problem. How might outlining help to develop understanding

Assessment of the financial viability : Morasco wants an assessment of the financial viability of this venture. a) Based on the data and assumptions provided, present a columnar statement of financial performance for Feb next year. This report should compare the results for both Lond..

What is an appendicular skeleton : State the sliding-filament theory of muscle. Name three proteins present in the thin filaments of muscle fibers.What is an appendicular skeleton?

Decision is critical for superannuation funds : 1. Why strategic asset allocation decision is critical for superannuation funds like State Trust Corporati+on?

Sales to justify introduction of the new credit policy : Dickson City Company has annual sales of $5 million, while the cost of goods sold is $3.2 million. All sales are made on a cash basis. The owner of Dickson has come up with the plan of giving credit to the customers. The manager of the firm doubts wh..

Why flowering plants have adopted such stretegy : The gymnosperms have haploid endosperm and it is formed before fertilization but among flowering plants, the endosperm is triploid and formed after fertilization. Why flowering plants have adopted such stretegy ?

The error was not discovered in the physical count : An $1,800 payment for repairs was erroneously charged to the Cost of Goods Sold account. Assume that the perpetual inventory system is used.

The securities act primarily concerned with : The securities act of 1933 is primarily concerned with.

Increase the market value of a call option : A(n) ____ will increase the market value of a call option.

User Account

All Pages