FN 601 Financial Management Lecture 4 - Working Capital Management Review and Assignment Questions Assignment Questions: 10, 11, 13 Review Questions: All the rest 1. UBS Ltd is considering changing its credit policy. Current sales under the present policy are Tshs 2,400 million per annum. The company has made the following estimates: Present Policy Additional sales demand Average collection period Bad debt risk (% of sales) Policy A 25% 2 Months 3% Policy B 35% 3 Months 6% 1 Month 1% You are given the following additional information: The company's expected return on investment is 20% Variable costs are 70% of gross sales value There will be no increase in fixed costs from extra turnover There will be no increase in average stocks or creditors . Required: Advise the company which is the preferable policy. FN 601 Financial Management Lecture 4 - Working Capital Management Review and Assignment Questions Assignment Questions: 10, 11, 13 Review Questions: All the rest 1. UBS Ltd is considering changing its credit policy. Current sales under the present policy are Tshs 2,400 million per annum. The company has made the following estimates: Present Policy Additional sales demand Average collection period Bad debt risk (% of sales) Policy A 25% 2 Months 3% Policy B 35% 3 Months 6% 1 Month 1% You are given the following additional information: The company's expected return on investment is 20% Variable costs are 70% of gross sales value There will be no increase in fixed costs from extra turnover There will be no increase in average stocks or creditors . Required: Advise the company which is the preferable policy