Solution-Suggest which policy is the best

Suggest which policy is the best

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Reference no: EM131105043

XYZ Ltd. provides you the following information in respect of its present debtors policy and proposed debtors policies :

Particulars	Present Policy	Proposed Policy I	Proposed Policy II
Average Collection Period	90 days	45 days	135 days
Credit Sales	$2,500,000	$1,500,000	$7,500,000
Required Rate of Return (Pre-tax)	20%	20%	20%
Bad Debts (%)	5%	2.5%	10%
Selling Price per unit	$500	$500	$500
Variable Cost per unit (% of Sales)	85%	85%	85%
Average Cost per unit	$450

Required: Suggest which policy is the best (Assume 360 days in a year)

Reference no: EM131105043

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Suggest which policy is the best

Reference no: EM131105043

Reference no: EM131105043

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