It May Appear That All Unprofitable Customers Should Be Dropped

question 34

Essay

It may appear that all unprofitable customers should be dropped.However,before any action is taken,managers should evaluate all the implications of the action for the affected customer,for other customers,and for the company.
Required:
a.Explain three implications for the affected customer.
b.Explain three implications for other customers.
c.Explain three implications for the company.

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Definitions:

Days' Sales in Receivable

A financial metric that calculates the average number of days it takes for a company to collect payments after a sale has been made.

Financial Records

Documents that capture all financial transactions of a business or individual, including income, expenses, assets, and liabilities.

Accounts Receivable Turnover

A financial ratio that measures how effectively a company collects cash from credit sales by comparing net credit sales with the average balance of accounts receivable.

Fiscal Years

A one-year period that companies and governments use for financial reporting and budgeting, differing from the calendar year.