Info:

Current Credit Policy= terms 1.5/15, net 45. Gross Sales= $25 million. 34% pay taking the discount.43% pay in full 45 days. 23% average 60 days. 1.5% of gross sales end up bad debt.

New tightening Credit Policy= 3/COD, net 25. 3% discount who pay cash on delivery. sales= 26.5 million. 47% of customers take discount. 38% would pay on day 25. 15% would pay late 42 days. bad debt would be 1%

variable cost-to-sales ratio is 75%. pre-tax cost of carrying recievables is 11%. tax is 36%. Ben thinks the variable cost ratio may rise to 85%

Assignment