Borrowing Causes
Greenbank Group has traditionally sold only to top-rated customers who averaged payments in 34 days. Sales were $3,700,000 last year and have been flat for the past two years. The company recently hired a new sales manager who has attempted to increase sales by accepting customers with lower credit ratings. As a result of his new policies, sales increased by 8 percent this year, accounts receivable days on hand increased to 52 days, and the company’s dollar profits remained the same as last year despite a rise in bad debt charge-offs.
What is the combined effect of these changes on Greenbank’s financing needs?
a. An increase
b. A decrease
c. No effect
d. Cannot be determined
Score Assessment