Should nwt change its credit terms

Reference no: EM131393818

Next Week's Technology (NWT) is evaluating whether to change its credit terms from 2/10, net 30 to 3/10, net 30. At present, 50 percent of NWT's sales are paid on Day 10, whereas, under the new terms, 60 percent of sales will be paid on Day 10. Regardless of the credit terms, half of the customers who do not take the discount are expected to pay on Day 30, whereas the remainder will pay 15 days late (no bad debts exist). But, as a result of the higher cash discount offered with the new terms, sales are expected to increase sales from $360,000 to $396,000 per year. NWT's variable cost ratio is 80 percent and its cost of funds is 9 percent. All production costs are paid on the day of the sale. Should NWT change its credit terms?

Reference no: EM131393818

Questions Cloud

Compute the days sales outstanding : Compute the days sales outstanding (DSO) under the existing policy and the proposed policy.

Should the change in credit terms be made : Assume all operating costs are paid when inventory is sold and that all sales are collected at the DSO.

What trades should you make to take advantage : what trades should you make to take advantage of the arbitrage opportunity? How profitable is the trip trade? What must the 6-month forward rate on the rupiah be if interest rate parity holds?

Which credit terms should the cfo recommend : Which credit terms should the CFO recommend? Assume all operating costs are paid when inventory is sold and all sales are collected at the DSO.

Should nwt change its credit terms : But, as a result of the higher cash discount offered with the new terms, sales are expected to increase sales from $360,000 to $396,000 per year. NWT's variable cost ratio is 80 percent and its cost of funds is 9 percent. All production costs are ..

Discuss about the post given below : Professionalism includes a particular skilled called life-long learning, and in many states, maintaining a P.E. license requires demonstration of continuing professional competency (CPC) by completing a number of professional development hours (PD..

What is the eoq : Michael's Mechanical sells 6,000 jettison machines annually. Each machine costs Michael's $2,000 to purchase, inventory carrying costs are 30 percent of the purchase price, and the cost of placing an order with its supplier is $120.

Calculate the cross-price elasticity of demand : calculate the cross-price elasticity of demand. calculate the income elasticity of demand. are the two goods compliments or substitues?

Compare two distinct concepts from the world of physics : Pick two distinct concepts from the world of physics. In a two page paper, compare and contrast the concepts with the end goal of making connections to your final course project

User Account

All Pages