Henderson Office Supply is considering a more liberal credit policy to increase sales, but expects that 9
Question:
a. What is the level of accounts receivable to support this sales expansion?
b. What would be Henderson’s incremental aftertax return on investment?
c. Should Henderson liberalize credit if a 16 percent aftertax return on investment is required?
Assume that Henderson also needs to increase its level of inventory to support new sales and that inventory turnover is two times.
d. What would be the total incremental investment in accounts receivable and inventory to support a $65,000 increase in sales?
e. Given the income determined in part b and the investment determined in part d, should Henderson extend more liberal credit terms?
Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
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Related Book For
Foundations of Financial Management
ISBN: 978-1259194078
15th edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
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