Solution-Current credit policy relative to the proposed

Current credit policy relative to the proposed changes

Reference no: EM131318586

Duff Beer is considering loosening its credit standards and lengthening the terms from net 30 days to net 45. Doing so will result in higher sales but also more defaults and extra administrative costs. Assuming variable costs are 45% of sales and 6% discount rate, analyze the current credit policy relative to the proposed changes (shown below). Which policy should the firm adopt?

	Sales (monthly)	Default Rate	Admin. Costs	Receivables (days)
Current	$12.0 m	1.5%	2.1%	35 days
Proposed	$12.5 m	1.9%	2.4%	51 days

Reference no: EM131318586

Questions Cloud

How much money would be credited to your account balance : If you bought one contract of corn at $2.50 per bushel and it rose in price to $2.57, how much money would be credited to your account balance at the close of the day?

Continuously compounded interest rate : a) What is the continuously compounded (annual) interest rate you can expect to earn with certainty over this period (1.5 to 2.0 years)? In other words, what is the forward rate from 1.5 to 2.0 years. b) Clear show what transactions you will undert..

Describe the route of a phone order : Describe the route of a phone order? A client calls to enter an order, and the conversation goes as follows:- Who is responsible for the error?

Discuss corporate concepts of wacc : In planning this course, we first wanted to cover financial topics that are important to virtually anyone. This week's final chapters go on to discuss corporate concepts of WACC, NPV, IRR and working capital decisions and shows how all these ideas..

Current credit policy relative to the proposed changes : Duff Beer is considering loosening its credit standards and lengthening the terms from net 30 days to net 45. Doing so will result in higher sales but also more defaults and extra administrative costs. Assuming variable costs are 45% of sales and ..

Discuss the role of information technology in a supply chain : MO0360 - Discuss the meaning of these two schools of thought in relation to managing innovation in supply chains, whilst relating this to some of the innovation and relationship management concepts discussed in the lectures and seminars throughout..

Find the stream function and sketch the streamlines : At what point on the surface of the circular cylinder in a potential flow does the pressure equal the free-stream pressure?

In your view what are the broader : In your view, what are the broader, long-term social consequences of the worker displacement caused by the increasing incorporation of robotics into the workplace? How might the insights of Marx and Weber provide guidance in terms of understanding..

What is the principle of rational acceptance : Name any three of the conditions that might lead to question a claim based on your own sensory experience?Please indicate any 2 of the methods for showing a premise to be dubious or false:What is the principle of rational acceptance?Which do you rega..

User Account

All Pages

Current credit policy relative to the proposed changes

Reference no: EM131318586

Reference no: EM131318586

Questions Cloud

Reviews

Write a Review

Finance Basics Questions & Answers

Financial reporting and analysis

A report on financial accounting

Describe the types of financial ratios

Differences between sole proprietorship and corporation

Prepare a cash budget statement

What are the implied interest rates

State pricing theory and no-arbitrage pricing theory

Small business administration

Effect of financial leverage

Evaluate the basis for the payment to the lender

Importance of opps, ipps, mpfs and dmepos

Time value of money

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT