If the cash discount period is increased, a firm’s investment in accounts receivable is expected to ________. A) increase because existing customers attracted by the new policy will buy more products B) decrease because of non–discount takers paying earlier to avail the cash discount C) decrease because discount takers will pay more in order to […]
Which of the following is true of changes in cash discount period? A) If a firm increases its cash discount period, the sales are expected to decrease, the bad debts are expected to decrease, and the profit per unit is expected to increase. B) If a firm decreases its cash discount period, the sales are […]
If a firm’s credit period is increased, the sales volume can be expected to ________, the investment in accounts receivable can be expected to ________, and the bad debt expenses can be expected to ________. A) increase; decrease; decrease B) increase; increase; decrease C) increase; increase; increase D) decrease; decrease; decrease ANSWER C
The net effect of changes in a cash discount period is quite difficult to analyze because they are directly attributable to the three forces affecting a firm’s investment in accounts receivable. Indicate whether the statement is true or false ANSWER TRUE
If a firm’s credit period is decreased, the sales volume can be expected to ________, the investment in accounts receivable can be expected to ________, and the bad debt expenses can be expected to ________. A) increase; decrease; decrease B) increase; increase; decrease C) increase; increase; increase D) decrease; decrease; decrease ANSWER D
A firm is analyzing a relaxation of credit standards that is expected to increase sales 10 percent. The firm is currently selling 400 units at an average sale price per unit of $575, and the variable cost per unit is $400 at the current sales volume. The average cost per unit is $425. What is […]
When a firm’s credit standards is relaxed ________. A) its sales is expected to decrease with corresponding increase in costs B) its costs is expected to decrease with corresponding decrease in sales C) its costs is expected to increase faster than sales if the standards are not relaxed D) its profit contribution from sales will […]
What is the firm’s additional profit contribution from sales under the proposed relaxation of credit standards? (See Table 14.5) A) $2,250 B) $6,750 C) $9,000 D) $69,000 ANSWER C
What is the cost of marginal investments in accounts receivable under the proposed plan? (See Table 14.5) A) $1,817 B) $1,867 C) $1,733 D) $1,617 ANSWER C
What is the cost of marginal bad debts under the proposed plan? (See Table 14.5) A) $383 B) $765 C) $3,315 D) $5,100 ANSWER C
