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Shortening the credit period. A firm is contemplating shortening its credit period from 30 to 20 days and believes? that, as a result of this? change, its average collection period will decline from 36 to 28 days. Bad-debt expenses are expected to decrease from 1.4% to 1.1 % of sales. The firm is currently selling 11,700 units but believes that as a result of the proposed? change, sales will decline to 9,700 units. The sale price per unit is $56?, and the variable cost per unit is $45. The firm has a required return on? equal-risk investments of 25.4%. Evaluate this? decision, and make a recommendation to the firm. ?(Note?: Assume a? 365-day year.)

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Financial Management, Finance

Category:- Financial Management
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