Question: Accounts receivable changes without bad debts Tara's Textiles currently has credit sales of $ 3 6 0 million per year and an average collection period
Accounts receivable changes without bad debts Tara's Textiles currently has credit sales of $ million per year and an average collection period of days. Assume that the price of Tara's products is $ per unit and that the variable costs are $ per unit. The firm is considering an accounts receivable change that will result in a increase in sales and a increase in the average collection period. No change in bad debts is expected. The firm's equalrisk opportunity cost on its investment in accounts receivable is Note: Use a day year.
a Calculate the additional profit contribution from newsales that the firm will realize if it makes the proposed change.
b What marginal investment in accounts receivable will result?
c Calculate the cost of the marginal investment in accounts receivable.
d Should the firm implement the proposed change? What other information would be helpful in your analysis?
Step by Step Solution
There are 3 Steps involved in it
1 Expert Approved Answer
Step: 1 Unlock
Question Has Been Solved by an Expert!
Get step-by-step solutions from verified subject matter experts
Step: 2 Unlock
Step: 3 Unlock
