Working Capital Management (Chapter 15): Tailor Nefzger Inc. wants to increase its credit standards. They expect sales will fall by

$50,000

, and that bad debt expense will fall by

10%

of this amount. The firm has a

15%

profit margin on its sales. The tougher credit standards will lower the firm's average receivables balance by

$10,000

and the average inventory balance by

$8,000

. The cost of financing current assets is estimated to be

12%

. Should Tailor Nefzer Inc. adopt the tighter credit standards? Why or why not?

Working Capital Management (Chapter 15): Tailor Nefzger Inc. wants to increase its credit standards. They expect sales will fall by $50,000, and that bad debt expense will fall by 10% of this amount. The firm has a 15% profit margin on its sales. The tougher credit standards will lower the firm's average receivables balance by $10,000 and the average inventory balance by $8,000. The cost of financing current assets is estimated to be 12%. Should Tailor Nefzger Inc. adopt the tighter credit standards? Why or why not