2. Credit policy A local Estonian company is considering tightening of it's credit standards. The only product it customers is a local popular drink called "Fisherman". The sales price per bottle is 4 EUR/unit. All sales directed to export and are credit sales. The company expects to sell 500,000 bottles next year. The variable costs per bottle are 3 EUR. Current credit standards are such that on average the customers pay in 60 days (some customers have longer and some shorter credit periods). According to the new policy, the company introduces uniform credit period for all customers, which is only 10 days. The company forecasts that as the result of policy change the sales! will decrease by 10%. However, losses from bad debts are expected to decline from current 3.5% level to 1.5% level of total sales revenue. The company finances it's accounts receivables (A/R) by short-term loans that carry 12% interest rate. Find: a) Gross profits before and after the policy change b) The amount invested into receivables before and after the change c) Change in the financing costs of receivables (using 12% interest rate) d) Change in the bad debt losses Finally, try to analyse, should the company change it's credit standards based on the information given above. If you are not sure about the calculations, still try to explain your reasoning. 2. Credit policy A local Estonian company is considering tightening of it's credit standards. The only product it customers is a local popular drink called "Fisherman". The sales price per bottle is 4 EUR/unit. All sales directed to export and are credit sales. The company expects to sell 500,000 bottles next year. The variable costs per bottle are 3 EUR. Current credit standards are such that on average the customers pay in 60 days (some customers have longer and some shorter credit periods). According to the new policy, the company introduces uniform credit period for all customers, which is only 10 days. The company forecasts that as the result of policy change the sales! will decrease by 10%. However, losses from bad debts are expected to decline from current 3.5% level to 1.5% level of total sales revenue. The company finances it's accounts receivables (A/R) by short-term loans that carry 12% interest rate. Find: a) Gross profits before and after the policy change b) The amount invested into receivables before and after the change c) Change in the financing costs of receivables (using 12% interest rate) d) Change in the bad debt losses Finally, try to analyse, should the company change it's credit standards based on the information given above. If you are not sure about the calculations, still try to explain your reasoning