Competitive Mesh Shirts Is Considering a Plan to Ease Its

question 34

Multiple Choice

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:

Centimetres

A measurement in the metric system that equals one percent of a meter.

Person's Height

A measurement of how tall an individual is, typically quantified in centimeters or feet and inches.

Negotiation

Negotiation is a dialogue between two or more people or parties intended to reach a beneficial outcome over one or more issues where a conflict exists with respect to at least one of these issues.

Walk Away

The act of leaving or disengaging from a situation or negotiation, especially when an agreement or resolution cannot be achieved.