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RECEIVABLES MANAGEMENT: QUESTION Super Sports Co. , dealing in sports goods, has an annual sale of $ 50 lakhs and is currently extending 30 days credit to the dealers. It is felt that sales can pick u

RECEIVABLES MANAGEMENT: QUESTION Super Sports Co. , dealing in sports goods, has an annual sale of $ 50 lakhs and is currently extending 30 days credit to the dealers. It is felt that sales can pick up considerably if the dealers are willing to carry increased stocks, but the dealers have difficulty in financing their inventory. Super Sports Co. is, therefore considering shifts in credit policy. The following information is available. The average collection period now is 30 days. Costs: Variable costs are 80% of sales. Fixed costs & 6 Lacs per anum Required (pre tax) return on investment: 20% CREDIT POLCY AVERAGE COLLECTION ANNUAL SALES ($ in Lacs) A 45 DAYS 56 B 60 DAYS 60 C 75 DAYS 62 D 90 DAYS 63 Determine which policy the company should adopt.

May 02 2020 View more View Less

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