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Credit Management: Credit Policy, Analysis and Risk

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?

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.

Recording of Credit Sales

The following transactions took place at Dave's Wildlife Resort during May. Indicate how these transactions would be entered in a sales journal like the one shown in figure 7.2. May 1 Sold a tent and other items on credit to Roy Anderson; issued Sales Slip 1101 for $360 plus sales tax of $29. 2. Sold a backpack, an air

Credit Policy

If the company reduces its receivables without adversely affecting sales, what effect should this have on the company's cash position (1) in the short run and (2) in the long run? Which ratios would explain whether a firm's customers pay more or less promptly than those of its competitors? Which ones would suggest that a firm

Credit policy and company risk

Does a firm face any risks if it tightens its credit policy? If a company reduces its DSO without seriously affecting sales, what effect would this have on its cash position (1) in the short run and (2) in the long run?

Nancy Tai has recently opened a revolving charge account with MasterCard.

Nancy Tai has recently opened a revolving charge account with MasterCard. Her credit limit is $1000, but she has not charged that much since opening the account. Nancy hasn't had the time to review her monthly statements as promptly as she should, but over the upcoming weekend, she plans to catch up on her work. In reviewing

Credit Policy Decision with Changing Variables

Comiskey Fence Co. is evaluating the extension of credit to a new group of customers. Although these customers will provide 180,000 in additional credit sales, 12 percent are likely to be uncollectible. The Company will also incur 15,700 in additional collection expense. Production and marketing costs represent 70 percent of sal

Credit policy Success

What kind of metrics might you use to measure the success of your company's credit policy?

Credit Policies

Our company has annual credit sales of $50 million. Bad debts are 3% of sales. Contribution margin on its sales is 30%. After my analysis, the following information about my proposed new credit policy to tighten credit policy from the current terms net 1/30 net 50 to net 30 is shown as follows: - Sales will decrease to $45

Credit policy for a company

During the meeting, my boss points out that the current level of bad debt and investment in accounts receivable are a little bit large. Apart from tightening the current credit policy, could you please suggest one way to reduce each of them if our company wants to maintain the credit policy.

Credit Standards at Magic Enterprises

Magic Enterprises is evaluating the profitability of easing its credit standards. Under its current policy, the firm extends credit only to the firms in credit risk groups 1, 2, 3, and 4. By not extending credit to groups 5 and 6, the firm estimates it loses $1,380,000 in sales annually. The firm's variable cost ratio is 0.82, a

Lawrence Sports Discussion Questions - Credit Policy

A. In principle how would should we decide the optimal credit policy? How should Lawrence Sports decide their optimal credit policy? b. What information is commonly used to assess the creditworthiness of a client? How can LS assess the creditworthiness of their clients? c. What are the components of a credit policy? Descri

Evaluating Credit Policy

A company is in the process of changing it's credit policy...the policy is currently cash only...the new policy will involve one period's credit...sales are 70,000 units per period at a unit price $530 per unit...if credit is offered the new price will be $552. Unit sales are not expected to change and all customers are expected

Credit Policy Evaluation Change

A company currently has an all credit policy but is considering making a change in the policy by going to terms of net 30 days...based on the information provided below what do you recommend ( required return is 2 % per month)... current policy new policy pri

Making a Credit Policy Decision with Changing Variables

Maddox Resources has credit sales of $180,000 yearly with credit terms of net 30 days, which is also the average collection period. Maddox does not offer a discount for early payment, so its customers take the full 30 days to pay.What is the average receivables balance? What is the receivables turnover?

Journalize entries for credit card sales.

Presented below are two independent situations. (a) On April 2, Julie Keiser uses her JCPenney Company credit card to purchase merchandise from a JCPenney store for $1,800. On May 1, Keiser is billed for the $1,800 amount due. Keiser pays $700 on the balance due on May 3. On June 1, Keiser receives a bill for the amount due,

Credit Policies Should you adopt either the policy? Why?

2. Your company is considering a modification to your credit policy, as follows: Policy C-1 Increases sales $5 million per year Average collection period for incremental sales = 45 days No bad-debt losses are expected. The company's variable cost of sales is 80%. Cost of capital is 20% Should

Credit Policy Key Factors

1. What are the four key factors in a firm's credit policy?How would an easy policy differ from a tight policy? Give examples how the four factors might differ between the two policies? How would the easy versus the tight policy affect sales? Profits?