Q2) Credit Period Credit Sales = $24mn per year Credit Terms = net / 30 Profit Margin = 20% Level of A/R = Credit Sales / Avg. Rec. Turnover, ARTO= 360 / Credit Period Marketing Dept comes and says that if you increase net / 30 to net / 60 then sales will increase by $6 million. Borrowing rate = 20% What do you do?
Q2) Credit Period Credit Sales = $24mn per year Credit Terms = net / 30 Profit Margin = 20% Level of A/R = Credit Sales / Avg. Rec. Turnover, ARTO= 360 / Credit Period Marketing Dept comes and says that if you increase net / 30 to net / 60 then sales will increase by $6 million. Borrowing rate = 20% What do you do?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter21: Supply Chains And Working Capital Management
Section: Chapter Questions
Problem 15P: Suppose a firm makes purchases of $3.65 million per year under terms of 2/10, net 30, and takes...
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Q2) Credit Period
- Credit Sales = $24mn per year
- Credit Terms = net / 30
- Profit Margin = 20%
- Level of A/R = Credit Sales / Avg. Rec. Turnover, ARTO= 360 / Credit Period
- Marketing Dept comes and says that if you increase net / 30 to net / 60 then sales will increase by $6 million.
- Borrowing rate = 20%
- What do you do?
Q3) Discount
- Sales = $24m
- Credit Terms = 2/10, net/30
- Borrowing rate = 17%
- 30% customers will avail discount and 70% will not avail. Is this a viable proposition?
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