A firm is currently selling its goods on 30 days credit. It is selling 4 Lakh units @ ₹12.5 each. Variable cost is ₹10 per unit and average cost is ₹11.5 per unit. The firm is planning to double the credit period. It wil
CS Executive · Financial and Strategic Management · PYQS · December 2022
A firm is currently selling its goods on 30 days credit. It is selling 4 Lakh units @ ₹12.5 each. Variable cost is ₹10 per unit and average cost is ₹11.5 per unit. The firm is planning to double the credit period. It will increase the sales by 20% and bad debts by ₹20,000. If the pre-tax required rate of return of the company is 20%, what will be the impact on company's profit if the policy is changed? Assume a 365 days' year. (A) Profit will increase by ₹98,000 approx. (B) Profit will increase by ₹78,000 approx. (C) Profit will increase by ₹70,000 approx. (D) Profit will decrease by ₹70,000 approx.
Answer & Explanation:
Correct Answer: Option (B)
Official answer key: (B).
Topics: Financial Management
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