How much can the firm obtain from factoring

Assignment Help Accounting Basics

Reference no: EM132982354

Question: Say a firm needs short-term financing. The firm's bank has offered a reasonable sum of loan for a term of one year at the interest rate of 9.5% per annum. The firm is considering if it should factor its receivables instead. The firm's sales in the coming year is expected to be RM29.2 million, and its average collection period is estimated to be 73 days. A factor offers a discount rate of 2.5% for the firm's receivables.

(a) How much can the firm obtain from factoring its receivables, and for how long?

(b) What is the cost per year to the firm if it factors its receivables continually?

Reference no: EM132982354

Questions Cloud

What is federal estate tax : What if the Biden administration removes or decreases the threshold? What is federal ESTATE tax? Define. What is the threshold?

Provide an explanation of areas or indicators in the income : Provide an explanation of areas or indicators in the income and cash flow statements that are most important for determining corporate valuation and performance

Describe conditions necessary for individuals to work safely : Describe the three conditions necessary for individuals to work safely. How can these conditions be used to increase safe work behaviours?

What is the amount of total liabilities at the end of year : If Xul's total assets decreased by $90,000 during the year and shareholders' equity increased by $120,000, what is the amount of total liabilities

How much can the firm obtain from factoring : How much can the firm obtain from factoring its receivables, and for how long and What is the cost per year to the firm if it factors its receivables

Discuss labour force and historical development of trade : Discuss the labour force and the historical development of trade unions or types of worker representation in Fiji Island. Give examples to support your answer.

Unionizing and collective bargaining : How does outsourcing and third-world labor markets enter into the mix when it comes to unionizing and collective bargaining?

Do believe the audit committee should be held responsible : Do you believe the Audit Committee and/or Compensation Committee should be held responsible for the undisclosed stock options backdating fraud?

Implementation of organisational human capital management : To help you justify the strategic value of a HCM section, conceptualise a framework for measurement and implementation of organisational human capital managemen

User Account

All Pages