Create an Account

Already have account?

Forgot Your Password ?

Home / Questions / Competitive Mesh Shirts is considering a plan to ease its credit terms in order to generat...

Competitive Mesh Shirts is considering a plan to ease its credit terms in order to generate greater revenues Last year Competitive had sales

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%.

 

70.What is Competitive’s current average investment in accounts receivable?

a.$41,095.89

b.$54,794.52

c.$821,917.81

d.not enough information is given

 

 

 

71.What is Competitive’s expected increase in bad debt expense?

a.$720,000

b.$400,000

c.$320,000

d.there is not enough information given

 

 

 

72.What will be Competitive’s cost of marginal investment in accounts receivable?

a.$1,479,452.84

b.$821,917.81

c.$65,753.50

d.There is not enough information given

 

 

 

 

 

73.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

 

 

 

74.What is Competitive’s marginal profit from increased sales?

a.$1,000,000

b.$5,000,000

c.$6,000,000

d.$7,000,000

 

 

 

75.What is Competitive’s net profit for the credit decision at hand?

a.$1,000,000.00

b.$614,246.50

c.$320,000.00

d.$65,753.50

 

 

 

 

 

 

 

 

 

76.A positive cash conversion cycle means that:

a.trade credit is providing enough financing to cover the firm's entire operating cycle.

b.the firm collects on sales more slowly than it pays its payables.

c.the firm collects on sales more quickly than it pays its payables.

d.trade credit does not provide enough financing to cover the firm's entire operating cycle.

 

 

 

77.With respect to inventory:

a.more is better as it will lead to happier customers

b.the larger the level, the faster the total asset turnover and the higher the return on total assets

c.additional investment in inventory must be justified by additional returns.

d.all of the above

e.(b) and (c) only

 

 

 

78.For accounts receivable, with respect to cost trade-offs the costs that must be evaluated are:

a.the cost of investment in accounts receivable and bad debts and the opportunity cost of lost sales due to overly restrictive credit policy and/or terms.

b.carrying costs and order and setup costs associated with replenishment and production of finished goods.

c.costs of reduced liquidity and financing costs resulting from the use of less expensive short-term financing.

d.none of the above

 

 

 

79.In the ABC System, inventory is categorized based upon:

a.volume

b.color

c.dollar investment

d.none of the above

Feb 13 2020 View more View Less

Answer (UnSolved)

question Get Solution

Related Questions