Liberal credit standards, Financial Accounting

Assignment Help:

In order to enhance sales from their present annual $35 million, ABC Company, a retailer, is considering more liberal credit standards. Presently, the firm has an average collection period of 30 days. It believes that with increasingly liberal credit standards, the following will result:
                                                                                         Credit Policy
                                                                                           A           B          C           D
Enhance in sales from previous level (in millions)                     $6.5      $4.8      $2.6       $1.8    
Average collection period for incremental sales (days)               45         60        90         150
Bad-Debt losses on incremental sales                                     3%         4%       6%         9%

The prices of its products average $30 per unit, and variable costs average $26 per unit. If the company has a before-tax opportunity cost of 20%, which credit policy should be pursued?


Related Discussions:- Liberal credit standards

Prepare a report addressing adjust financial statements, You are the audito...

You are the auditor of a small private company called XYZ Limited. Last year, which was 20X9, the audit went smoothly and every balance on the financial statements was correct. Thi

Extract the term structure of interest rates, Extract the term structure of...

Extract the term structure of interest rates out to 3 years given the following bond data: Maturity (yrs)    Coupon rate (%)   Yield to maturity (%) 0. 5

What is the worst case npv and best case npv, An investment under considera...

An investment under consideration has a payback of seven years and a cost of $724,000. If the required return is 12 percent, what is the worst-case NPV? The best-case NPV? Explain.

Official development assistance , 1. To qualify as official development ass...

1. To qualify as official development assistance (ODA), development loans must have a grant element of at least 25 percent, calculated using a stated annual interest rate of 10 per

#Withholding Tax Payable, #Hi! would you mind to help me? is there such an ...

#Hi! would you mind to help me? is there such an accounting term as Withholding Tax Payable??? please help me.. thanks

Calculate the npv for the purchase, 1. Lease vs. Buy Trasky Company is t...

1. Lease vs. Buy Trasky Company is trying to decide whether it should purchase or lease a new automated machine to be used in the production of a new product. If purchased, the

Case law about investment, As an investor, you are considering buying stock...

As an investor, you are considering buying stock in a relatively new company. Medical Horizons, Inc., has been in existence for 10 years and is now about to go public. The first st

Fraudulent preferences-fraudulent conveyances, Fraudulent preferences ...

Fraudulent preferences The trustee can set aside any transaction effected within the six months preceding the presentation of the petition in circumstances such as to make it

Vat, a recommendation regarding the current south African vat system

a recommendation regarding the current south African vat system

Intra company adjustments-group accounts, INTRA COMPANY ADJUSTMENTS In pr...

INTRA COMPANY ADJUSTMENTS In preparing the consolidated balance sheet, the following items may require adjustments:. 1    Goodwill 2    Unrealized profit on closing inventory 3

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd