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    Credit Policy: Should a More Stringent Policy Be Adopted?

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    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?

    © BrainMass Inc. brainmass.com June 3, 2020, 6:30 pm ad1c9bdddf
    https://brainmass.com/business/credit-management-credit-policy-analysis-and-risk/credit-policy-stringent-policy-adopted-62859

    Solution Preview

    If one bed has a selling price of $100. This means that Universal Bed Corp would have a gross profit of $20 on that one bed. Let's say in a given month he sells 10 beds. ...

    Solution Summary

    This solution discusses in 135 words why the policy with the higher net profit should be adopted.

    $2.19

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