Competitive Mesh Shirts Competitive Mesh Shirts Is Considering a Plan to Ease Its

question 48

Multiple Choice

Competitive Mesh Shirts
Competitive Mesh Shirts is considering a plan to ease its credit terms in order to generate greater revenues. Last year, Competitive had sales of 1,000,000 units at a price and variable cost of $20 and $15, respectively. Its current average collection period is 20 days and its percentage of bad debt expense is 2% while it required return on investment is 10%. If Competitive were to ease its credit terms, the firm anticipates that its sales would increase to 1,200,000 units without a change in price or variable costs. However, the average collection period is expected to increase to 30 days and bad debt expense is expected to increase to 3%.

-What is Competitive's future average investment in accounts receivable?

• A) $3,287.67
• B) $98,630.14
• C) $1,479,452.84
• D) not enough information is given

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Definitions:

Negotiation

Negotiation is the process of discussing and arriving at a mutual agreement between two or more parties, each with their own interests and objectives.

Joint Decisions

Decisions made collaboratively by two or more parties, often involving shared responsibility and contribution towards the outcomes.

Collaboration

Working together with others to achieve a common goal through sharing ideas, learning, and building consensus.

Solving Problems

The process of identifying a problem, finding possible solutions, and choosing the most appropriate solution for the situation.