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What is the average receivables balance? What is the receivables turnover?
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
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
What change might be expected on the balance sheet of its customers?
Question: What is country risk analysis? How is country risk analysis conducted?
What are the components of a credit policy? Describe the components of credit policy as it applies to LS?
Problem: Magic Enterprises is evaluating the profitability of easing its credit standards.
During the meeting, my boss points out that the current level of bad debt and investment in accounts receivable are a little bit large.
If it earns 8.0% on any cash freed-up by this change, how would that affect its net income, assuming other things are held constant?
How can I estimate the change in profit for the company after launching the new credit policy ?
Problem: What kind of metrics might you use to measure the success of your company's credit policy?
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?