In an analysis of alternative credit-management policies, which of the following components will cause the net present value of receivables on credit sales to increase, if everything else remains constant?
A) A tougher collections policy that reduces the bad debt loss ratio.
B) A higher cost per unit sold.
C) A longer average collection period.
D) An increase in the cost of capital.

Question

Quizplus · Accepted Answer

A tougher collections policy that reduces the bad debt loss ratio will increase the net present value of receivables on credit sales because it will reduce the amount of money that is lost due to bad debts.

In an Analysis of Alternative Credit-Management Policies, Which of the Following