Balsam Corporation Is Concerned About Their Current Bad Debt Ratio

Multiple Choice

Balsam Corporation is concerned about their current bad debt ratio of 9%.The CFO believes imposing a more stringent credit policy may reduce sales by 8% and reduce the bad debt ratio to 6%.If the cost of goods sold is 85% of the selling price, determine if the new policy should be undertaken.

A) Undertake; increase of 40% in profits
B) Undertake; increase of 38% in profits
C) Do not undertake; decrease of 36% in profits
D) Do not undertake; decrease of 34% in profits