Assume the business sells to individuals and retailers, ranging from small shops to large chains. Assume that it currently offers credit terms of 1/15, n/60, and ships FOB destination. Toimprove its cash flow, it is considering changing credit terms to 3/10, n/30. In addition, itproposes to change shipping terms to FOB shipping point. It expects that the increase indiscount rate will increase net sales by 9%, but the gross margin ratio (and ratio of cost of salesdivided by net sales) is expected to remain unchanged. It also expects that delivery expenseswill be zero under this proposal: thus, expenses other than cost of sales are expected toincrease only 6%.