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NEW QUESTION: 1
The sales manager at Ryan Company feels confident that if the credit policy at Ryan's was changed,
sales would increase and, consequently, the company would utilize excess capacity. The two credit
proposals being considered are as follows:
Currently, payment terms are net 30. The proposal payment terms for Proposal A and Proposal B are net
4 5 and net 90, respectively. An analysis to compare these two proposals for the change in credit policy
would include all of the following factors, except the:
A. Bank loan covenants on days sales outstanding.
B. Impact on the current customer base of extending terms to only certain customers.
C. Current bad debt experience.
D. Cost of funds for Ryan.
Choice "b" is correct. Because the bad debt percentage is the same under either of the two proposals,
there is no differential cost associated with bad debt. Because it is not a differential cost, it is not
considered in comparing the two alternatives. Choice "a" is incorrect. Because Proposal A and B have
different net collection dates, Proposal B will cause a greater amount of accounts receivable with a
corresponding increase in working capital. The cost to fund this will be greater for Proposal B, so this is a
legitimate concern. Choice "c" is incorrect. Customers may feel they should be given the extended terms.
If this is granted, the additional working capital need will be even greater. Choice "d" is incorrect. Banks
may require that days sales outstanding cannot exceed a certain number of days. If so, it will be harder to
meet this covenant with Proposal B.
NEW QUESTION: 2
The following is a network diagram for a project.
The critical path for the project is how many days in duration?
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