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Please find the below attached question and give the answer properly. 5. A trader whose current sales are in the region of 6 lakhs per
Please find the below attached question and give the answer properly.
5. A trader whose current sales are in the region of 6 lakhs per annum and an average collection period of 30 days wants to pursue a more liberal policy to improve sales. A study made by a management consultant reveals the following information:- Credit Policy Increase in Increase in sales Present default collection period anticipated A 10 days 30,000 1.5% B 20 days 48,000 2% 30 days 75,000 3% D 45 days 390,000 4% The selling price per unit is 33. Average cost per unit is 2.25 and variable costs per unit are 2. The current bad debt loss is 1%. Required return on additional investment is 20%. Assume a 360 days year. Which of the above policies would you recommend for adoption
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