Advice the company on whether or not should change policy

Assignment Help Financial Accounting

Reference no: EM132754620

Game Ltd makes annual sales of 120,000 units at Sh10 per unit. The unit variable cost is Sh6. The company is considering changing its credit policy and this is expected to result to a 15% increase in sales. The increase in bad debts expenses is expected to be from 2% to 3% of the sales. Other working capital items apart from accounts receivable are expected to be 25% for the sales. The company incurs credit analysis of 10% of the sales and collection costs of 5% of the sales. The current credit terms are net 30 and the proposed terms are 2/10 net 30. The company expects 20% of the customers to take advantage of the cash discount. The opportunity cost of capital is 12%. Assume a 360-day a year.

Required:

Problem 1: Advice the company on whether or not it should change its credit policy.

Reference no: EM132754620

Questions Cloud

Determine the monthly loan payment : Dave purchased a brand new Telsa Model S by taking out a 5 year loan for $125,000 with an interest rate of 8%. Determine the monthly loan payment

Discuss about users and uses of accounting information : Judgements and decisions by the user of accounts. In the light of given definition of accounting, discuss about users and uses of accounting information

Purposes of cell reproduction : What are the purposes of cell reproduction both at the cellular and an organism level?

Explain how the researchers implemented the design : Identify the type of quantitative research design used and explain how the researchers implemented the design.

Advice the company on whether or not should change policy : The company is considering changing its credit policy. Advice the company on whether or not it should change its credit policy.

What is the issuance price of this bond : Zeeb Corp issued a 15-year bond with a face value of $30,000 and no stated rate. What is the issuance price of this bond

Should the company buy the machine in first place : TheReal after-tax cost of capital is 12% (Real rate) and inflation over the period has been estimated at 3% should the company buy the machine in first place

Appropriate analysis of the data : A researcher randomly assigns 33 subjects to one of three groups. Group 1 receives technical dietary information interactively from an on-line website.

Describe one energy resource : Describe one energy resource that is readily available in your community or state.

User Account

All Pages