Bluegrass Distilleries, Inc

question 9

Multiple Choice

Bluegrass Distilleries, Inc. refuses to extend credit to any wholesale distributors who have a history of being delinquent in repaying credit extended to them. This policy results in lost sales of $10 million annually. Based on experience with these types of customers, the firm estimates that the average collection period would be 90 days and that the bad-debt loss ratio would be 6%. The firm's variable cost ratio is 0.80, making its profit contribution ratio 0.20. Bluegrass Distilleries' required pretax return (i.e., opportunity cost) on receivables investments is 20%. When converting from annual to daily data or vice versa, assume there are 365 days per year. Determine the net effect on Bluegrass Distilleries' pretax profits of extending credit to these (previously delinquent) customers

• A) $906,849
• B) $2,000,000
• C) $306,849
• D) $1,500,000

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Definitions:

Extreme Poverty

A condition characterized by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education, and information.

East Asia

A geographical region that includes countries such as China, Japan, South Korea, and North Korea, known for its significant cultural, economic, and political influence.

China

is a country in East Asia, known for its vast population, rich history, and significant influence on global economics and politics.

Mono-Culture

The agricultural practice of growing a single crop species over a wide area for many consecutive years, potentially leading to decreased biodiversity and increased vulnerability to pests and diseases.