Q No 7. A proposal is given below for your own firm:

Credit Sales = $24mn per year

Credit Terms = net / 30

Profit Margin = 20%

Level of A/R = Credit Sales / Avg. Rec. Turnover, ARTO= 360 / Credit Period

Marketing Dept comes and says that if you increase net / 30 to net / 60 then sales will increase by $6 million.Borrowing rate = 20%

On the basis of credit period policy, what do you do?

Q No 7. b) on the basis of following information,

ales = $24m

Credit Terms = 2/10, net/30

Borrowing rate = 17%

30% customers will avail discount and 70% will not avail.

Is this a viable proposition if a discount is given?