Illustration: A company sells $50,000 of goods with the terms net/30. The receivable is immediately factored with a 3% factor fee, 10% interest, and a reserve of 8%. How much does the selling firm immediately receive from the factor?

Illustration: A company sells $50,000 of goods with the terms net/30. The receivable is immediately factored with a 3% factor fee, 10% interest, and a reserve of 8%. How much does the selling firm immediately receive from the factor?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 22P

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Concept explainers

Conversion Cycle

Conversion cycle is also known as cash cycle or net operating cycle. Conversion cycle refers to how much time a company takes to turn its investments which is done from stock or any other financial resources into cash flows from sales.

Question

Illustration: A company sells $50,000 of goods with the terms
net/30. The receivable is immediately factored with a 3% factor
fee, 10% interest, and a reserve of 8%. How much does the selling
firm immediately receive from the factor?

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