Question

Robinson Company (recall their data from problems 2, 3, and 4) has a 2014 profit margin of 5 percent. They are examining the possibility of loosening their credit policy. Analysis shows that sales may rise 10 percent while bad debts on the change in sales will be 2 percent. The cost of financing the increase in current assets is 10 percent.
a), Should Robinson change its credit policy?
b) Using the information stated in the problem, at what profit margin is Robinson indifferent between changing the policy or maintaining its current standard?
c) Using the information stated in the problem, at what financing cost is Robinson indifferent between changing or maintaining the credit policy?
d) Using the information stated in the problem, by what amount can the current assets change so that Robinson is indifferent between changing or maintaining their credit policy?



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  • CreatedMarch 27, 2015
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