Universal Corporation Is Concerned About Their Current Bad Debt Ratio

question 74

Multiple Choice

Universal Corporation is concerned about their current bad debt ratio of 6%.The CFO believes imposing a more stringent credit policy may reduce sales by 5% and reduce the bad debt ratio to 4%.If the cost of goods sold is 80% of the selling price, determine if the new policy should be undertaken.

• A)Undertake; increase of 8.57% in profits
• B)Undertake; increase of 9.55% in profits
• C)Do not undertake; decrease of 8.57% in profits
• D)Do not undertake; decrease of 9.55% in profits

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Definitions:

Sample Means

Average values derived from a subset (sample) of a larger population.

Standard Deviation

Square root of the variance that represents the average deviation of a score from the mean.

Sampling Distribution

The probability distribution of a given statistic based on a random sample, used to estimate properties of an underlying population.

Mean

The arithmetic average of a set of scores.