question archive Your firm wants to extend trade credit to some customers previously considered poor risks
Your firm wants to extend trade credit to some customers previously considered poor risks
Subject:FinancePrice: Bought3
Your firm wants to extend trade credit to some customers previously considered poor risks. Sales would increase by $25 million. For these customers, the production and selling costs will be 5% more than your gross margin. Additional collection costs will be 8,000,000. Of the new accounts generated, 15% will not be collectible. The firm expects 20% of the paying customers will take the 3% discount offered by the firm. Due to procedural changes, there is no additional investment in accounts receivable. Should the firm extend more liberal credit terms?
