urrently has sales of P1,000,000 and its DSO is 30 days, the financial manager estimates that offering longer credit terms would increase the days sales outstanding to 50 days and increase the sales to P1,200,000. However, bad debt losses, which were 2% on the old sales, would amount to 5% only on the incremental sales. Variable costs are 80% of sales; ABC Corp. has a 15% receivable financing cost. (360 day/year) What would the annual incremental pre-tax profit be i
urrently has sales of P1,000,000 and its DSO is 30 days, the financial manager estimates that offering longer credit terms would increase the days sales outstanding to 50 days and increase the sales to P1,200,000. However, bad debt losses, which were 2% on the old sales, would amount to 5% only on the incremental sales. Variable costs are 80% of sales; ABC Corp. has a 15% receivable financing cost. (360 day/year) What would the annual incremental pre-tax profit be i
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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ABC Corp currently has sales of P1,000,000 and its DSO is 30 days, the
What would the annual incremental pre-tax profit be if ABC Corp. extended its credit period?
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