Determine the net effect on creoles pretax profits

Assignment Help Financial Management

Reference no: EM131336490

Creole Industries, Inc., estimates that if it spent an additional $20,000 to hire another collection agent in its credit department, it could lower its bad-debt loss ratio to 3.5 percent from a current rate of 4 percent and also reduce its average collection period from 50 to 45 days.

(Assume that sales and inventory remain unchanged if the agent is hired.) Creole's annual credit sales are $5 million, and its variable cost ratio is 0.75. The firm's required pretax rate of return on receivables investment (i.e., the opportunity cost) is 18 percent. Determine the net effect on Creole's pretax profits of hiring the additional collection agent.

Reference no: EM131336490

Questions Cloud

Decision-support tools : For a healthcare facility, explain the benefits of utilizing the ten necessary decision-support tools presented in Chapter 10 of your textbook. Your response must be at least 200 words in length.

Explain how advancements in clinical systems : Explain how advancements in clinical systems can benefit healthcare organizations today. Your response must be at least 200 words in length.

Identify the role of the community organization : Identify the role of the Community Organization for your project. You should utilize all the information you collected since the beginning of this course

Health risk assessment program : Horace did not participate in the health risk assessment program because he has bi-polar disorder and high blood pressure that he had not disclosed to City Police Department, and he was afraid that, if he participated in the health risk assessment..

Determine the net effect on creoles pretax profits : Creole's annual credit sales are $5 million, and its variable cost ratio is 0.75.- Determine the net effect on Creole's pretax profits of hiring the additional collection agent.

Interrelationship between entertainment media and culture : Write 350 to 700 word paper in which you investigate the interrelationship between the entertainment media and culture. answer the following question

Explain how organization relate strategically to it function : Search the Internet for organizations that have embraced IT and have proven successful at excelling in Information Delivery: It's Evolving Role. Include examples to demonstrate a course understanding. Suggested areas of discussion could include: e..

Determine the net effect on jenkins pretax profits : Jenkins Supply Corporation sells $120 million of its products to wholesalers on terms of "net 50."- Determine the net effect on Jenkins' pretax profits of offering a 1 percent cash discount.

Developing an effective sales force selection or training : Is the key to developing an effective sales force selection or training? Explain your choice

User Account

All Pages