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Questions and Answers
What is the selling price per unit?
How many additional units would be sold if option B is implemented?
What percentage of default is anticipated with option C?
Which of the following credit period increases sales by 60,000 units?
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What is the current bad debt loss percentage?
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Study Notes
Current Situation
- Annual sales of Rs. 10 lakhs
- Average collection period is 30 days
- Current bad debt loss is 1%
- Selling price per unit is Rs. 10
- Average cost per unit is Rs. 6
- Variable cost per unit is Rs. 4
Proposed Liberal Credit Policies
- Policy A: Increase collection period by 15 days, increase sales by 20,000 units, anticipated default rate is 1.5%
- Policy B: Increase collection period by 25 days, increase sales by 40,000 units, anticipated default rate is 2.5%
- Policy C: Increase collection period by 30 days, increase sales by 60,000 units, anticipated default rate is 3.5%
- Policy D: Increase collection period by 40 days, increase sales by 70,000 units, anticipated default rate is 4.5%
Recommendation
- It's not possible to recommend the best credit policy without further analysis
- Calculations are needed for profit margin, return on investment (ROI) and other relevant factors.
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Description
Explore various liberal credit policies proposed for a business scenario. The quiz evaluates the impact of these policies on sales volume, collection period, and default rates, emphasizing the need for calculations on profit margins and ROI. Test your understanding of financial analysis and credit management concepts.
