Credit policy
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Credit Policy. As treasurer of the Universal Bed Corporation, Aristotle Procrustes is worried
about his bad debt ratio, which is currently running at 6 percent. He believes that imposing a
more stringent credit policy might reduce sales by 5 percent and reduce the bad debt ratio to 4
percent. If the cost of goods sold is 80 percent of the selling price, should Mr. Procrustes adopt
the more stringent policy?
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Under current scheme
Gross profit = (1-80%)=20%
Loss due to bad debt = 6%
Net profit = ...
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