A Firm Is Considering Relaxing Credit Standards Which Will Result

question 292

Multiple Choice

A firm is considering relaxing credit standards which will result in an increase in annual sales from $3 million to $3.75 million, a decrease in the cost of annual sales from $2,225,000 to $2,000,000, an increase in additional profit contribution from sales of $10,000, and an increase in the average collection period of 15 days, from 20 to 35 days. The bad debt loss is expected to increase from 1 percent to 1.5 percent of sales. The firm's required return on investments is 15 percent. The net result of the firm relaxing its credit standards is ________. (Assume a 360-day year.)

• A) $10,000
• B) -$16,250
• C) -$26,875
• D) -$16,875

Understand the role and impact of statistical analysis in operations management, particularly in improving quality and productivity.

Learn the strategic importance of dispatching, sequencing, and routing in streamlining operations.

Understand how to enhance business productivity by optimizing inputs and outputs.

Comprehend the importance of adopting international quality standards and their role in quality assurance.

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