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
A. Cite and discuss five reasons for the extensive use of trade credit. b. What are the five Cs of credit? c. Optical Supply Company offers credit terms of 2/10, net 60. If Optical Supply is considering a change in its credit terms to one of those indicated, explain whether the change should increase or decrease sales. (
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
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,
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
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 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, 12Â percent are likely to be uncollectible. The company will also incur $21,000 in additional collection expense. Production and market
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
Even if a company has experienced positive cash flow for a number of years, why should it plan for and have the ability to quickly secure short-term loans such as a line of credit?
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
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
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
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
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
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 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
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
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
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
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)
Berkshire Sports, Inc., operates a mail-order running-shoe business. Management is considering dropping its policy of no credit. The credit policy under consideration by Berkshire follows: No Credit Credit Price per unit $35 $40 Cost per unit $25 $32 Quantity sold 2,000 3,000 Probability of pay
28.5 The Theodore Bruin Corporation , a manufacturer of high-quality stuffed animals, does not extend credit to its customers. A study has shown that, by offering credit, the company can increase sales from the current 750 units to 1,000 units. The cost per unit, however, will increase from $43 to $45, reflecting the expense
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
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. 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
Please explain the difference in determining the bad debt expense when using "accounts receivable" as the basis and using "credit sales" as the basis. Include the way it is recorded in the allowance account. Please also explain this briefly: 8. Credit card expense may be classified as: A) A "discount" deducted from sal
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
Unit 5 IP Write a 2-3 page paper explaining why time lags in discretionary fiscal policy can adversely affect the efforts of the Congress and the President in attempting to maintain a healthy economy. Could it happen that these time lags could actually work to destabilize the economy? Unit 5 DB 2-3 paragraphs In 2003, the I
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
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?