Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
In order to increase the sales from the normal level of Rs 2.4 Lakh per annum, the marketing manager submits a proposal for liberalizing credit policy as under: Normal sales Rs 2.4 lakh. Normal credit period 30 days. The firm is contemplating to increase the credit period to 75 days. This proposal would increase the sales by Rs 21000. The Profit Volume Ratio is 30%. The company expects a return of 20% on its investments. Evaluate the above alternative and advise the management (assume 360 days
a year)
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