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Credit Management: Credit Policy, Analysis and Risk

A large retailer obtains merchandise under the credit terms of 1/15, net 45, but routinely takes 60 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit?

A large retailer obtains merchandise under the credit terms of 1/15, net 45, but routinely takes 60 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit?

Risk Analysis and Profile

You believe Dr. Washington is now ready to begin risk analysis and is ready to understand the types of risk associated with different investment vehicles. The most basic fact you want to convey to him is risk and return the greater the risk, the greater the expected return. From there, you want to explain how expected returns ca

Impact of perceived market credit risk on price

Consider an outstanding corporate bond in the secondary market (issued a few months ago). All else being equal, the market suddenly perceives a more important credit risk associated with the considered issuer. What impact should it have on: the credit spread, the yield and the price?

Are banks acting in a responsible fashion with their solicitations of consumers for credit cards and increases in credit card lines? What responsibility do consumers have with regard to credit card debt? What disclosure rules apply in banks' solicitations of credit card customers? What should the banks do to influence legislation?

Are banks acting in a responsible fashion with their solicitations of consumers for credit cards and increases in credit card lines? What responsibility do consumers have with regard to credit card debt? What disclosure rules apply in banks' solicitations of credit card customers? What should the banks do to influence legi

Risk Analysis of Alumina, Inc.

After running a "business simulation" develop a 1400 to 1800 word risk analysis that includes the follow criteria: a. Identify the key facts, regulations, and legal issues in the simulation. b. Based on the simulation, identify several of company values and stakeholders. What are the conflicts among the competing stakeholders,

2007 Housing Sub-Prime Lending Debacle

Credit policy has been a key issue during the 2007 housing sub-prime lending debacle, in particular "American Home Mortgage." Credit is an important business tool that can have significant financial consequences. What could a company like this have done to ensure that credit facilities are used effectively and to the benefit of

Discuss the rationale behind a liberalization of credit policy and its effect on sales and accounts receivable, in particular any associated financing impacts. What organizations have been in the news due to their poor credit ratings, and how has that affected their business?

Discuss the rationale behind a liberalization of credit policy and its effect on sales and accounts receivable, in particular any associated financing impacts. What organizations have been in the news due to their poor credit ratings, and how has that affected their business?

How Credit Terms Affect A/R, Sales & Profit

E. Explain how each of the following actions is likely to affect each of accounts receivable, sales, and profit. In your answer, explain whether the action will increase or decrease each variable or have an indeterminate effect. a) The firm loosens its credit standards. b) The terms of trade are changed from 3/10, net 30 t

Part I and II Primary Sources of Funding: Loans: 7(a) Loan Program ? CapLines o Line of Credit:  Standard Asset-Based Line-Revolving line of credit for recurring and short-term debts.  Seasonal Line-Loans to finance inventory expenses and accounts receivable during short-fall periods.  Small Asset-Based Line-This credit line offers the potential to obtain up to a $200,000 line of credit with initial fee requirements waived. o Constraints:  Regardless of whether or not the organization is successful, the organization is obligated to repay the line of credit.  Line of credit may be difficult to obtain especially for new entrepreneurs.  Credit restrictions may apply depending on the type of program you are using.  May incur upfront charges and fees.  Higher interest rates than a traditional loan or secured line of credit. o Resource: http://www.sba.gov/category/navigation-structure/loans-grants/small-business-loans/sba-loan-programs/7a-loan-program/special-purpose-loans-program ? Microloan Program: Not-for-Profit-community based small business loans for short-term and long-term loans. o Constraints:  This loan can only be used as a source of working capital, and/or purchasing supplies needed for inventory.  Borrowers are prohibited from purchasing real estate or paying off existing debt.  Microloans will require collateral.  Potential credit restrictions and/or obligations may apply depending on the lender.

Part I and II Primary Sources of Funding: Loans: 7(a) Loan Program ? CapLines o Line of Credit:  Standard Asset-Based Line-Revolving line of credit for recurring and short-term debts.  Seasonal Line-Loans to finance inventory expenses and accounts receivable during short-fall periods.  Small Asset

Credit terms, use Excel

Credit terms Purchases made on credit are due in full by the end of the billing period. Many firms extend a discount for payment made in the first part of the billing period. The original invoice contains a type of "short-hand" notation that explains the credit terms that apply (assume a 365 day year). A) Write the short-ha

Credit and interest rates

Do you believe that customers who are poor credit risks deserve to be charged higher interest rates? If you say yes, are you not taking advantage of customers who can least afford to pay extra for the things that they buy?

Average accounts receivable balance

Darla's Cosmetics has annual credit sales of $1,440,000 and an average collection period of 45 days in 2008. Assume a 360 day year. What is the company's average accounts receivable balance? Accounts receivable are equal to the average daily credit sales times the average collection period. If accounts receivalbe change t

Analyzing credit policy: Bandwagonesque corporation

(Marginal analysis) The Bandwagonesque Corporation is considering relaxing its current credit policy. Currently, the firm has annual sales (all credit) of $5 million and an average collection period of 60 days (assume a 360-day year). Under the proposed change, the trade credit terms would be changed from net 60 to ne

A Firm's Credit Policy and Competition

Question: What are the four elements of a firm's credit policy? To what extent can firms set their own credit policies as opposed to having to accept policies that are dictated by 'the competition'?

HR Issue Description: Sexual harassment policy statement & procedures.

A company has hired you to recommend changes to its human resource for a complaint. Management expects that you know the relevant issues. Their goal is to implement change, bring the company to compliance, and begin the process of invoking the spirit of the law. You will create a policy and a monitoring procedure that is imminen

No Child Left Behind Act

Could someone give me a brief evaluation of the No Child left behind act looking at policy overview, policy statement, and policy status?

Country Risk Analysis in an Organization

How would an organization use country risk analysis to decide whether global expansion is advisable? Discuss at least two of the different country risks and the potential impact these risks can have on an organization.

Discuss effects of extending customer credit and increasing vendor credit period

You have a sole-proprietorship merchandising business dealing with photography equipment. The business was established three years ago, and it has had an average annual turnover of $50,000. However, over the last six months, the monthly sales have fallen considerably. To reverse this downward slide, you are considering selling t

Credit Policy Decisions

Collins Office Supplies is considering a more liberal credit policy to increase sales, but expects that 9 percent of the new accounts will be uncollectible. Collection costs are 5 percent of new sales, production and selling costs are 78 percent, and accounts receivable turnover is five times. Assume income taxes of 30 percent a

Financial Risk Catagories

Describe the risk exposure(s) in the following financial transactions. Identify which transactions are influenced by interest rates or interest income. (CAUTION: Some can be influenced by both!) Risk Types: Interest rate risk, Credit risk, Technology risk, Foreign exchange rate risk, Country or sovereign risk Financial

Pro forma financial statements

Below are the pro forma financial statements for 2010 of your company. The owners of the company have grown sales by having a very generous credit policy. The yearend A/R balance will be $2,500,000 which is about 90 days of sales. There will also be a Notes Payable bank loan of $1,900,000 outstanding at the end of the year. The

Reducing business risk policy

Most companies implement various policy and procedures in an effort to reduce various risk factors. Some companies have policies that employees who dealt with sensitive information not only had to go through a background check but they also had to pass a credit check. Do you think this is an effective policy to reduce risk?

Studying effects of more liberal credit policy

Office Supply Company is considering a liberal credit policy to increase sales, and expects 9% of new accounts will not be collected. Collection costs are 5% of new sales; production and selling costs are 78% and account receivable turnover is 5 times. Income taxes are 30% and an increase in sales of $80,000. a) What is the