The sales director of ABC Corp suggest the following credit terms. He estimated the following: Sales will increase by at least 20% AR turnover will be reduced to 8 times from present turnover of 10 times. Bad debts will increase to 1.5%. Current bad debts are 1%. Current sales is P 900,000 Variable cost ratio is 55%. Desired rate of return is 20% Fixed expenses is P 150,000 What is the net advantage of changing the credit terms?
The sales director of ABC Corp suggest the following credit terms. He estimated the following: Sales will increase by at least 20% AR turnover will be reduced to 8 times from present turnover of 10 times. Bad debts will increase to 1.5%. Current bad debts are 1%. Current sales is P 900,000 Variable cost ratio is 55%. Desired rate of return is 20% Fixed expenses is P 150,000 What is the net advantage of changing the credit terms?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The sales director of ABC Corp suggest the following credit terms. He estimated the following:
Sales will increase by at least 20%
AR turnover will be reduced to 8 times from present turnover of 10 times.
Current sales is P 900,000
Variable cost ratio is 55%.
Desired
Fixed expenses is P 150,000
What is the net advantage of changing the credit terms?
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