Forrester fashion has annual credit sales of 270000 units, Ask an Expert

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Forrester fashion has annual credit sales of $270,000 units with an average collection period of 66 days. The company has a per-unit variable cost of $19 and a per-unit sale price of $28.50. Bad debts currently are 4.5% of sales. The firm estimates that a proposed relaxation of credit standards would not affect its 66-day average collection period but would increase bad debts to 6.75% of sales, which would increase to 324,000 units per year. Forrester requires a 15% return on investments.

What is the cost from the increased marginal investment in A/R?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92778477

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