PLEARS SOLVE THIS QUESTION FROM DEBTORS MGT.
ABC firm is considering to make certain relaxation in its credit policy. the mgt. has decided to evaluate two new policies.
(i) the annual credit sales at present is rs.87.5 lakhs
(i) proposed credit sales
under alternative 1-105 lakhs
under alternative 2 -118 lakhs
(iii)accounts receivable turnover ratio and bad debts losses.
EXISTING I II
7 times 5.25 times 4.2 times
rs 2.63 lakhs rs 5.25 lakhs rs 7.88 lakhs
(IV) the abc is required to give a return over 30% on investment in new accounts receivable
(v) its PV ratio is 30%
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