Brain mass Inc currently has sales of $1,000,000, and its days sales outstanding is 30 days. The financial manager estimates that offering longer credit terms would (1) increase the days sales outstanding to 50 days and (2) increase sales to $1,200,000. However, bad debt losses, which were 2 percent on the old sales, would amount to 5 percent on the incremental sales only (bad debts on the old sales would stay at 2%). Variable cost are 80 percent of sales, and Bass has a 15 percent receivables financing cost. What would the annual incremental pre-tax profit be if Bass extended its credit period?© BrainMass Inc. brainmass.com October 9, 2019, 7:47 pm ad1c9bdddf
What would the annual incremental pre-tax profit be if Bass extended its credit period?
Incremental Income pre taxes
1) Increase in ...
The expert determines the annual incremental pre-tax profit.