9. The PQR Company's annual credit sales are *60 crore. The company's existing credit terms are 1/15,
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9. The PQR Company's annual credit sales are *60 crore. The company's existing credit terms are "1/15, net 40". Generally 60 per cent of the customers avail the cash discount facility. The average collection period is 45 days. The percentage default rate is 0.5 per cent. The company is thinking of two alternative changes in credit terms: Percentage Taking Collection Default Period Percentage Credit Terms Discount 2/10, net 35 80 3/10, net 25 95 20 1.0 14 1.5 What strategy should be followed by PQR if sales are expected to remain stable and the required rate of return is 18 per cent?
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Muhammad Salman Alvi
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