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Q4. A company currently has an annual sales of Rs.60,00,000 with a gross profit ratio of 30%, fixed cost Rs.5,00,000 and average collection period of 30 days. The current level of bad debts is 1% of the total sales. The company is receiving the requests to follow more liberal policies. The following details have been collected by the company regarding increase in sales and bad-debts cost. Credit Increase in Increase in sales Bad-debts as % policy credit period (Rs.) from current of total sales (days) sales A 3,00,000 B 15 4,25,000 1.4 C 5,00,000 1.7 D 6,00,000 2.3 If the applicable tax rate is 30% and expected return on investment is 10% would you suggest a change from the current level? If yes, which plan should be the preferred plan? Assume 360 days in a year for your calculations. 10 1.2 30 45