The following companies are considering a change in their accounts receivables policy. Required: Determine whether the proposed
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Determine whether the proposed change in accounts receivables policy is beneficial to any of these companies.
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Alpha Industries Beta Ltd. Gamma Inc. Current receivables policy Unit sale price Contribution margin per unit Units sold per year on credit Average collection period in days Bad debts per year Interest rate on line of credit $400 $130 75,000 60 $200,000 13% $860 $300 22,000 90 $300,000 9% 190 $90 130,000 100 $400,000 10% Proposed new receivables policy Revised average collection period in days Cost % reduction in unit sales 30 $45,000 5% 60 $100,000 5% 45 $60,000 7%
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Alpha and Beta would save money by changing their credit policy for accounts receivable H...View the full answer
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Related Book For
Financial Management for Decision Makers
ISBN: 978-0138011604
2nd Canadian edition
Authors: Peter Atrill, Paul Hurley
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