13 FIN4801 MAY/JUNE 2017 Question 3.4 (7 Marks) Tops Pty(Ltd) is a medium-sized retailer of meat products. The company has seen dwindling sales over the past year, and the management of the company has decided to offer better credit terms and less stringent credit checks to its customers in order to boost sales. This move is expected to increase sales from R3 000 000 per year to R3 800 000 per year. Bad debts will rise from 2% of sales to 4% of sales and the average collection period of the company is expected to increase from 20 days to 30 days. The company's variable costs associated with sales amount to 50% of sales and it is expected to stay at this level. A money market deposit account could earn 8% per annum. Evaluate whether or not the company should adopt these new credit standards. Also briefly discuss the expected changes. 13 FIN4801 MAY/JUNE 2017 Question 3.4 (7 Marks) Tops Pty(Ltd) is a medium-sized retailer of meat products. The company has seen dwindling sales over the past year, and the management of the company has decided to offer better credit terms and less stringent credit checks to its customers in order to boost sales. This move is expected to increase sales from R3 000 000 per year to R3 800 000 per year. Bad debts will rise from 2% of sales to 4% of sales and the average collection period of the company is expected to increase from 20 days to 30 days. The company's variable costs associated with sales amount to 50% of sales and it is expected to stay at this level. A money market deposit account could earn 8% per annum. Evaluate whether or not the company should adopt these new credit standards. Also briefly discuss the expected changes