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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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A Using Common Size Data for Credit Analysis

You are the credit manager for London Supplies. One of your sales staff has made a $50,000 credit sale to Bing Company, an electronics manufacturer. Your responsibility is to decide whether to approve the sale. You have the following data for the electronics industry and bing:

Chapter 12, Problem 84PSA, A Using Common Size Data for Credit Analysis You are the credit manager for London Supplies. One of , example  1

For bing, you have the following data for the year ended December 31. 2019:

Chapter 12, Problem 84PSA, A Using Common Size Data for Credit Analysis You are the credit manager for London Supplies. One of , example  2

The salesperson believes that fling would order about $200,000 per year of materials that would provide a gross margin of $35,000 to London if reasonable credit terms could be arranged.

Required:

CONCEPTUAL CONNECTION State whether you would grant authorization for Bing to purchase on credit and support your decision.

Chapter 12, Problem 84PSA, A Using Common Size Data for Credit Analysis You are the credit manager for London Supplies. One of , example  3

To determine

Common-size analysis changes over each line of fiscal report information to an effectively equivalent, or common-size, sum estimated as a percent. This is finished by expressing pay articulation things as a percent of net deals and accounting report things as a percent of absolute resources.

To discuss:

Discuss that the manager would allow to sale or purchase the good to the Bing on credit.

Explanation

On the basis of the 2015-2019.

In the Bing company is overall is good in the previous data bases because the average growth rate is also high and growth rate is also high, debt to equity ratio is below and the current ratio is also is near to standard ratio which is 1:1. Company is also has focus to account receivable.

On the basis of 2019 current data

Company performance is little down because some of the analysis is below:

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