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factoring department of Inter American Bank (IAB)

The factoring department of Inter American Bank (IAB) is processing 100,000 invoices per year with average invoice value of $1,500. IAB buys the accounts receivable at 4 percent off the invoice value. The average collection period is 30 days. Currently 2 percent of the accounts receivable turns out to be bad debt. The annual interest rate is 10 percent. The annual operating expense of this department is $400,000. What is the gross profit before interest and tax for the factoring department of IAB?

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The factoring department of Inter American Bank (IAB) is processing 100,000 invoices per year with average invoice value of $1,500. IAB buys the accounts receivable at 4 percent off the invoice value. The ...

Solution Summary

This solution is comprised of a detailed explanation to answer what is the gross profit before interest and tax for the factoring department of IAB.

$2.19