This is something that the company needs to take into account because the reaction of customers may change the results of the plans significantly. This is something that must be considered because it is possible that if it takes the company too long to collect their receivables, they will be in default on some bank loans. The current levels of bad debts will not impact the decision about which of these two options is better. If the level of bad debts is expected to change as a result of the decision they make, the amount of change only would impact the decision. But the current level of bad debts is irrelevant to the decision. Because the proposals are to increase credit sales, this becomes an investment since the company will make sales without collecting the cash at the same time. This will require an investment by the company to bridge the short-term gap in cash flows. The cost of funds is an important part of this decision.
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