PrepTest 19, Section 2, Question 13
A company with long-outstanding bills owed by its customers can assign those bills to a collection agency that pays the company a fraction of their amount and then tries to collect payment from the customers. Since these agencies pay companies only 15 percent of the total amount of the outstanding bills, a company interested in reducing losses from long-outstanding bills would be well advised to pursue its debtors on its own.
A company with long-outstanding bills owed by its customers can assign those bills to a collection agency that pays the company a fraction of their amount and then tries to collect payment from the customers. Since these agencies pay companies only 15 percent of the total amount of the outstanding bills, a company interested in reducing losses from long-outstanding bills would be well advised to pursue its debtors on its own.
A company with long-outstanding bills owed by its customers can assign those bills to a collection agency that pays the company a fraction of their amount and then tries to collect payment from the customers. Since these agencies pay companies only 15 percent of the total amount of the outstanding bills, a company interested in reducing losses from long-outstanding bills would be well advised to pursue its debtors on its own.
A company with long-outstanding bills owed by its customers can assign those bills to a collection agency that pays the company a fraction of their amount and then tries to collect payment from the customers. Since these agencies pay companies only 15 percent of the total amount of the outstanding bills, a company interested in reducing losses from long-outstanding bills would be well advised to pursue its debtors on its own.
The argument depends on the assumption that
a company that pursues its debtors on its own typically collects more than 15 percent of the total amount of the long-outstanding bills that it is owed
the cost to a company of pursuing its debtors on its own for payment of long-outstanding bills does not exceed 15 percent of the total amount of those bills
collection agencies that are assigned bills for collection by companies are unsuccessful in collecting, on average, only 15 percent of the total amount of those bills
at least 15 percent of the customers that owe money to companies eventually pay their bills whether or not those bills are assigned to a collection agency
unless most of the customers of a company pay their bills, that company in the long run will not be profitable
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