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Credit Management: Credit Policy, Analysis and Risk

Credit policy

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

Velcro Saddles: conclusions about credit policy

See attached file also. Jim Khana, the credit manager of Velcro Saddles, is reappraising the company's credit policy. Velcro sells on term of net 30. Cost of goods sold is 85% of sales and fixed costs are a further 5% of sales. Velcro classifies customers on a scale of 1 to 4. During the past five years,

Case analysis Capstan Autos: why has the bank withheld further credit?

See attached file. Case Study Analysis: Mini Case - Capstan Autos a. Briefly summarize the case. b. Prepare a response to Mr. Capstan from the bank in which you explain why the bank would be reluctant to extend further credit to his organization even though his organization appears to be projecting sales growth. Provi

External Finance need with movements in variety of cashflow?

Indicate whether each of the following would typically increase or decrease a firm's need for additional external financing: a) An increase in cash dividends b) An increase in the net profit margin c) A decrease in the credit period offered by the firm's suppliers d) A decrease in the credit period offered to the firm's cu

Curtis Toy: Credit Policy decision with changing variables

Curtis Toy Manufacturing Company is evaluating the extension of credit to a new group of customers. Although these customers will provide $240,000 in additional credit sales, 12 percent are likely to be uncollectible. The company will also incur $21,000 in additional collection expense. Production and market

Calculate effect of changes to credit policy

My management team is concerned with our company's credit policy being too lax and wants to tighten it up. We want to enforce a stronger credit policy and lower our DSO to 25 days. We expect to lose some credit sales because of the stronger policy and believe annual sales will decline by 5%. Can someone tell me how much will our

Credit Term

Richenstein Enterprises is in the business of selling dishwashers. The firm needs $192,000 to finance an anticipated expansion in receivables due to increased sales. Richenstein's credit terms are net 40, and its average monthly credit sales are $180,000. In general, the firm's customers pay within the credit period; thus, the f

Credit Policy Evaluation

The Johnson Company sells 3,000 pairs of running shoes per month at a cash price of $90 per pair. The fi rm is considering a new policy that involves 30 days' credit and an increase in price to $91.84 per pair on credit sales. The cash price will remain at $90, and the new policy is not expected to affect the quantity sold. The

Collins Office Supplies: Credit policy decisions, receivables and inventory.

17. 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 perce

Credit policy

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

Advantages and disadvantages of credit cards

Your son is a freshman in college. During a recent weekend visit to campus, you noticed a credit card statement on the desk in his dorm room. Compose a letter to your son explaining the advantages and disadvantages of credit cards. In your letter, provide guidance to your son on the responsible use of credit.

P5-4 Solar Designs Risk analysis

P5-4 Risk analysis Solar Designs is considering an investment in an expanded product line. Two possible types of expansion are being considered. After investigating the possible outcomes, the company made the estimates shown in the following table: Expansion A Expansion B Initial investment $ 12,000 $12,000 Annua

Risks of International Finance

Using information from the simulation, the Electronic Reserve Readings (ERR), the Internet, or other sources, identify and research at least three current risks facing organizations engaged in international finance activities. Based on your research, prepare a 350-700-word paper in which you describe the identified risks and the

Credit Policy Questions: Mucklehoney Example

Mucklehoney Sports operates a mail-order running shoe business. Management is considering adopting a credit policy to expand its business from an all sales for cash. The credit policy under consideration is as follows: Credit CreditNo Price per unit $35 $40 Cos

Credit Terms

The Dunstill company has obtained the following information: · Annual Credit Sales= 30 million · Collections period is= 60 days · Credit terms= Net 30 days · Interest rate = 12% The company is considering changing it's credit terms to 4/10 net 30. The company anticipates 50% of the customers will take advantage of this

Discussion Question regarding Financial Risk Management

Financial decision making requires assessment of risk. Select terms for each category below and then define it and provide an example. 2 Risk Assessment Behavioral Methods (ex. Sensitivity Analysis) 2 ways to quantitatively assess risk (ex. Standard Deviation) 3 risk management techniques (ex. Portfolio Management)

Credit term problem

Can you help me understand this question? 30. On September 1, a firm grants credit with terms of 2/10 net 45. The creditor: (Points: 3) must pay a penalty of 2% when payment is made later than September 1st. must pay a penalty of 10% when payment is made later than 2 days after September 1st. rece

Credit periods and credit policies

Can you help me understand these questions? 27. Lengthening the credit period _____ the price paid by the customer. Generally, this acts to _____ sales. (Points: 3) increases; increase increases; decrease decreases; decrease decreases; increase increases; have no effect on

Relaxation of credit standards

Relaxation of credit standards. Lewis Enterprises is considering relaxing its credit standards to increase its currently sagging sales. As a result of the proposed relaxation, sales are expected to increase by 10% from 10,000 to 11,000 units during the coming year; the average collection period is expected to increase from 45 to

Credit Card and Company Contracts

1) Did you know that you likely cannot sue your credit card company? Over the past 36 months you probably received an enclosure in one of your credit card bills (or a separate mailing) that was a change in the terms of your account. One of the provisions added a requirement that all complaints you have with the card issuer mus

Finance problem credit management and collection

16. Credit Policy. A firm currently makes only cash sales. It estimates that allowing trade credit on terms of net 30 would increase monthly sales from 200 to 220 units per month. The price per unit is $101 and the cost (in present value terms) is $80. The interest rate is 1 percent per month. a. Should the firm change its c

Credit Policy, Monitoring Accounting, and Collection Policy

How is the credit policy set in your organization? Why is monitoring accounts receivable important? What is the best way to monitor it? What is the collection policy at your company? Which department sets the collection policy, finance or marketing? Why?

Investments: Lewis Enterprises is considering relaxing its credit standards

Lewis Enterprises is considering relaxing its credit standards to increase its currently sagging sales. As a result of the proposed relaxation, sales are expected to increase by 10% from 10,000 to 11,000 units during the coming year; the average collection period is expected to increase from 45 to 60 days; and bad debts are exp

Description of Risk and Mitigation of Current Risks

Identify and research at least three current risks facing organizations engaged in international finance activities. Based on your research, prepare a paper in which you describe the identified risks and the tools that organizations could use to mitigate these risks.