1.What is the cost of marginal bad debts?
A firm is considering relaxing its credit standards which will result in annual sales increasing from $1.50 million to $2.18 million. As a result of the change in credit standards bad debt expense is expected to increase from 0.3% to 1.6%.
2.what the cost of investing in the extra accounts receivables from the planned relaxation of credit standards?
A firm is considering relaxing its credit standards which will result in annual sales increasing from $1.50 million to $1.88 million. Costs of goods sold represent 45 percent of sales and the average collection period is expected to increase from 35 to 54 days. If the firm requires a return of 10.5 percent
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