Ficti Onike Structured Activity t Tohtening Credif Terms ratio a 73%, thxes are 40%, and the interest rate on Ninds invested in receivables is 25%. Open wipradseet cument polcy: 1 Kirw policy: 1 Theid the thomes in credit terms be made? Tightening Credit Terms \begin{tabular}{|c|c|} \hline Firmte current orode terms, net & 90 \\ \hline Indusiry-wide creda termis, net. & 30 \\ \hline Discounts & 50 \\ \hline \begin{tabular}{l} Bncounts \\ Bad Debr Losses \end{tabular} & so \\ \hline Firm's variable cost ratio & 73.00% \\ \hline \begin{tabular}{l} Tax rate. \\ Tate \end{tabular} & 40.00% \\ \hline Interest rate on funds invested in recelvabies & 25.00% \\ \hline Days in year & 365 \\ \hline \multicolumn{2}{|l|}{ Cument Credit Paficy: } \\ \hline Amual crodis sales & $2,710,000 \\ \hline Dars saies ousianding, DSO & 95 \\ \hline \end{tabular} \begin{tabular}{|c|c|} \hline \begin{tabular}{l} Now Crodit Policy, Tighten to \\ industry-Averoge Credil Terms: \end{tabular} & \\ \hline Amnual credit sales & $2,585,000 \\ \hline Days sales outstanding. DSO & 35 \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|} \hline Changing Credit Policy Analysis: & \begin{tabular}{l} Projected Income \\ Statement Under \\ Current Credit Polay \end{tabular} & \begin{tabular}{c} Eflect of \\ Credit Policy \\ Change \\ \end{tabular} & \begin{tabular}{l} Projeced Income \\ Statement Under New \\ Credit Pollcy \\ \end{tabular} \\ \hline Gross sales & $2,710,000 & $125,000 & $2,585,000 \\ \hline Discounts & 0 & 0 & 0 \\ \hline \multirow{2}{*}{\multicolumn{4}{|c|}{\begin{tabular}{l} Net sales \\ Variable costs \end{tabular}}} \\ \hline & & & \\ \hline \multicolumn{4}{|l|}{ Profit bofore credit conts and taxes } \\ \hline \multicolumn{4}{|l|}{ Credili-folated conts: } \\ \hline \multicolumn{4}{|l|}{ Cost of carring receivables } \\ \hline Bad debt losses. & 0 & 0 & 0 \\ \hline \multicolumn{4}{|l|}{ Profit belore taxes } \\ \hline \multicolumn{4}{|l|}{ Taxes } \\ \hline \multicolumn{4}{|l|}{ Net income } \\ \hline \multicolumn{4}{|l|}{ Should the change in credi terms be made? } \\ \hline & & & \\ \hline \multicolumn{4}{|l|}{ Formulas: } \\ \hline Changing Crodit Policy Analysit: & \begin{tabular}{l} Projecled Income \\ Statement Under \\ Cument Credi Policy \\ \end{tabular} & \begin{tabular}{c} Eflect of \\ Credit Policy \\ Change \\ \end{tabular} & \begin{tabular}{c} Projeced Income \\ Statement Under Naw \\ Credit Policy \\ \end{tabular} \\ \hline Gross sales. & =813 & =f21821 & =817 \\ \hline Discounts & cos5 & =F22822 & -5855. \\ \hline Net sales & BNIA & minia & NNA \\ \hline Varabie costs & evia. & swa. & aniA \\ \hline Proft belore credit costh and tases & BiA & INIA & BNA \\ \hline \multicolumn{4}{|l|}{\begin{tabular}{l} Crodilicloled conta: \\ Cost of carring receivation \end{tabular}} \\ \hline Cost of carrying receivables & SWIA. & F mia & WNA \\ \hline Bad debt losees & asess. & -528.828 & aSAS6 \\ \hline Profir betore taxes & & min & ANA \\ \hline Taxes. & swis. & r sia & AN/A \\ \hline Net inceme. & & & en/A \\ \hline & WNiA & & \\ \hline Should the change in creda terms be made? & HWA & & \\ \hline \end{tabular}