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Question: Discuss the benefits and costs of instituting a more lenient trade credit policy. Why might firms decide to do this?
Which cost-allocation based would the manager of the Individual Department prefer the most?
Should credit be extended if 15 percent of the new sales prove uncollectible?
Also, calculate the interest Nancy would have paid with: a) the previous balance method, b) the adjusted balance method.
The firm's required return on equal risk investments is 25%. Should the firm go ahead with its plan to relax credit standards?
Question: Does a firm face any risks if it tightens its credit policy?
What effect should this have on the company's cash position (1) in the short run and (2) in the long run?
If the interest rate on funds invested in receivables is 18 percent, should the change in credit terms be made?
Why do firms find themselves with idle cash? How might companies take advantage of this cash?
Identify and research at least three current risks facing organizations engaged in international finance activities.
Also, Is there a risk to missing opportunities to increase sales by being to strict on the screening process and passing on credit customers?
Question: Briefly review the effects of credit policy on cash conversion cycle and revenue.
Evaluate the proposed relaxation, and make a recommendation to the firm. (Note: Assume a 365-day year.)
How is the credit policy set in your organization? Why is monitoring accounts receivable important?
What if 5 percent of only the new customers fail to pay their bills? The current customers take advantage of the 30 days of free credit
Write a 2-3 page paper explaining why time lags in discretionary fiscal policy can adversely affect the efforts of the Congress
What do you think about modifying a contract in this manner?
Please explain the difference in determining the bad debt expense when using "accounts receivable" as the basis and using "credit sales" as the basis.
Relaxation of credit standards. Lewis Enterprises is considering relaxing its credit standards to increase its currently sagging sales.
Question: On September 1, a firm grants credit with terms of 2/10 net 45. The creditor:
The company anticipates 50% of the customers will take advantage of this policy and that the collection period will drop by 30 days. Should company make change?
1. Should Mucklehoney offer credit to its customers? 2. What must the probability of payment be before Berkshire would adopt the policy?
Determine the range of the rates of return for each of the two projects.
Compose a letter to your son explaining the advantages and disadvantages of credit cards.