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
Briefly review the effects of credit policy on cash conversion cycle and revenue. Explain what kind of factors you would use to manage these in your organization in this direction.
What are some of the screening tools a company may use in screening candidates for credit thoroughly to ensure on time payment. Also, Is there a risk to missing opportunities to increase sales by being to strict on the screening process and passing on credit customers?
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.
Scenario: Janeen's Horse Supply is considering a more stringent credit policy. Currently 6% of annual sales are written off for bad debt. It has been estimated if the credit standards are raised, the annual sales will decrease by 5%; however, the bad debt will decrease to 4% of total sales. The profit margin on sales is 20
(1) Why do firms find themselves with idle cash? How might companies take advantage of this cash? (2) In principle, how should we decide the optimal credit policy?
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
1. Kim Mitchell, the new credit manager of the Vinson Corporation, was alarmed to find that Vinson sells on credit terms of net 90 days while industrywide credit terms have recently been lowered to net 30 days. On annual credit sales of $2.5 million, Vinson currently averages 95 days of sales in accounts receivable. Mitchell est
Please see the attached file. 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.
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
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?
Need step by step calculations that explain process for solving the answer. 1. Lewis Enterprise 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 col
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
The maximum amount of credit an employer can claim against the FUTA tax is 5.4 percent. What are the requirements that must be met?
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
I need help with the following problems: Use the following to answer questions 11-15: Scotia Credit Checks produces two styles of credit reports: Individual and Corporate. The difference between the two is the amount of background information and data collection required. The Corporate report uses more skilled personnel
Discuss the benefits and costs of instituting a more lenient trade credit policy. Why might firms decide to do this?
What kind of metrics might you use to measure the success of your company's credit policy?
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
Aziz Industries has sales of $100,000 and accounts receivable of $11,500, and it gives its customers 30 days to pay. The industry average DSO is 27 days, based on a 365-day year. If the company changes its credit and collection policy sufficiently to cause its DSO to fall to the industry average, and if it earns 8.0% on any ca
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.
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
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
What is country risk analysis? How is country risk analysis conducted? Is country risk analysis an effective tool in determining the desirability of establishing a manufacturing site or other mode of entry?
A large manufacturing firm has been selling on a 3/10, net 30 basis. The firm changes its credit terms to 2/20, net 90. What change might be expected on the balance sheet of its customers? I don't understand what these terms mean.
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
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
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?
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,
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