Maggies gold coins inc is considering shortening its credit, Ask an Expert

Finance

Maggie's Gold Coins, Inc. is considering shortening its credit period from 30 days to 20 days and believes, as a result of this change, its average collection period will decrease from 36 days to 30 days.

Bad debt expenses are also expected to decrease from 1.2 percent to 0.8 percent of sales.

The firm is currently selling 300000 units but believes as a result of the change, sales will decline to 275000 units. On 300000 units, sales revenue is 4200000, variable costs total 3300000 and fixed costs are 300000. The firm has a required return on similar risk investments of 15 percent.

Evaluate this proposed change and make a recommendation to the firm.

The question is: What do you do, and why?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92813722

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