Reference no: EM133170925
Question - Bracelet Blanks, Inc. (BB) generated $43,803,000 in sales (all on credit) during 2010. Cost of goods sold was 57% of that total. Accounts receivable was $3,240,222, inventory was $842,020, and accounts payable was $1,826,070.
1. In an attempt to increase sales, BB is considering relaxing its credit standards by giving more credit to small businesses. BB charges $1.50 per Unit. Variable costs are $0.5126 per unit and fixed costs are $10,000,000 per year. The relaxation of credit regulations is expected to produce a 3.8% increase in sales (the company has sufficient excess capacity to handle the increase) as well as a three-day increase in the average collection period. Bad debts are also expected to increase from their current level of 0% to 0.5% of sales. Assuming that BB requires a 13% return on investments of this type, should the company relax its credit standards?
2. In addition, BB currently offers its credit customers terms of 30 days from the beginning of the credit period, at the end of the month or invoice date, to pay the total amount of the invoice. However, consider modifying the conditions so that the customer can subtract a 2% discount from the invoice amount if they make the payment within the days of the cash discount period, or they can choose to pay the full amount of the invoice. another's invoice for a 30-day credit period by reducing the amount of time it takes to collect your accounts receivable. The company thinks that this change will only decrease the average collection period by five days. BB also expects that 63% of its clients will choose to pay within the discount period and that the more attractive terms will increase sales by 1% a year. You do not expect bad debts to change from their current level of 0% as a result of this change in terms. The opportunity cost of funds invested in accounts receivable is 10%. Should the company offer the cash discount?
Reference - Graham, R., Smart, S.B., Megginson, W.L. (2011). Corporate Finance: the link between theory and what companies do. Cengage Learning Publishers.
|
Relationship between personal ethics and business ethics
: What do you feel is the relationship between personal ethics and business ethics?
|
|
Variety of approaches to ethical challenges
: By talking to different generations in the workforce, we are likely to see a variety of approaches to ethical challenges. If the very definition of work, and so
|
|
What is the net asset value of an investment company
: What is the net asset value of an investment company with $10,400,000 in assets, $650,000 in current liabilities, and 1,120,000 shares outstanding
|
|
Identify strategic management skill
: Identify a strategic management skill that you learned or acquired in this course and explain how you would apply it to improve success in your career
|
|
Should the company relax its credit standards
: Bad debts are also expected to increase from their current level of 0% to 0.5% of sales. Should the company relax its credit standards
|
|
Research methodology - the case for blantyre
: Case for Blantyr - Assessing the Challenges Faced by Micro, Small and Medium Enterprises in Malawi
|
|
Summarize ethics in financial responsibilities
: Summarize ethics in financial responsibilities and to evaluate ethical considerations of executive compensation
|
|
About business ethics-business relationships and leadership
: This assignment provides you with an opportunity to think critically about business ethics, business relationships, leadership,
|
|
Concerns about continued environmental sustainability
: You were hired three years ago by a footwear manufacturer based in a small town in Northern Ontario ,to help improve occupational health and safety and boost th
|