Question

To increase sales, management is considering reducing its credit standards. This action is expected to increase sales by $125,000. Unfortunately, it is anticipated that 7 percent of the sales will be uncollectible. Accounts receivable turnover is expected to be six times a year, and it costs the firm 10 percent to carry its receivables. Collection costs will be
4 percent of sales, and the cost of the additional goods sold is $64,000.
Will earnings increase?


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  • CreatedMarch 19, 2015
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