Credit Policy. Wilder Corporation is considering granting credit to currently limited customers or no-credit customers. The following information is given:

Category              Bad Debt Percentage     Collection Period           Credit Terms      Incremental Annual Sales Accompanying Relaxation in Credit Standards ($)

A             3              20 days                 Full         250,000

B             6              45 days                 Restricted           540,000

C             10           90 days                 No credit             800,000

Gross profit approximates 12 percent of sales. The rate of return is 18 percent. Should credit be extended to categories B and C?

Answer rating: 100% (QA)

ANSWER Yes credit should be extended to categories B and C EXPLANATION The decision to extend credit should be based on the incremental cash flows ass... View the full answer