Write down only the change in gross profit

Assignment Help Finance Basics
Reference no: EM133000377

Tyres Ltd sells tyres on credit only. The management of the company estimated that it could increase sales by offering better credit terms. Currently, the days sales outstanding (or average collection period) is 11 days. It is expected that this will change to 40 days under the new standards. Sales are expected to increase from R100m to R105m. No discounts are offered and bad debts are negligible. The company can borrow short term funds at a rate of 10% and has a gross profit margin of 15%. Would it be worthwhile for the company to change its credit terms?

Write down only the change in gross profit, the change in bad debt, the change in the investment in accounts receivable and the expected change in net profit. (Clearly label the three required answers)

Reference no: EM133000377

Questions Cloud

Identify the regulatory framework : Identify the regulatory framework under which finance and mortgage brokers operate
What is the current value of the company : Change Corporation expects an EBIT of $41,000 every year forever. The company currently has no debt, and its cost of equity is 15 percent. The corporate tax rat
Define the determinants of intrinsic values and share prices : 1. Explain the main financial goal that managers of companies have. How does corporate governance help you meet this goal?
What is the value of project : Now suppose the project has no cash flows in years 1 to 5, has a cash flow of $44,000 in year 6 that then grows at a rate of 2% forever. The discount rate is 10
Write down only the change in gross profit : Tyres Ltd sells tyres on credit only. The management of the company estimated that it could increase sales by offering better credit terms. Currently, the days
Price affect the demand for loanable funds : How might the expectations of higher oil price affect the demand for loanable funds, supply of loanable funds and the interest rates of a country?
What is the time cash flow : Geo-Express is considering purchasing a used truck for its delivery business in order to serve a new geographical area. The truck costs $7,834 and will be strai
Views regarding risk and return : About risk and return. Individuals and business enterprises can change their views of both desired return and desired risk over time.
What was the term of the loan : William borrowed $15,500 at an annual simple interest rate of 12.50 percent. He repaid the loan by paying a lump sum of $15,894.93.

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the compounded annual rate

Payday loans are very short-term loans that charge very high interest rates. You can borrow $325 today and repay $390 in two weeks.

  Recommend two practices for analyzing financial statements

Discussion: Analyses- Recommend at least two best practices for analyzing multiyear financial statements. Justify your response.

  Complete a comprehensive financial plan

The purpose of this assignment is for students to initiate and complete a comprehensive financial plan. Display your calculations

  Limitations of financial ratios

Referencing this week's readings and lecture, what are the limitations of financial ratios? Classify your answer into at least the following categories: liquidity ratios, activity ratios, leverage ratios, and profitability ratios.

  If someone is 19 years old deposits 3000 each year into a

if someone is 19 years old deposits 3000 each year into a traditional ira individual retirement account for 51 years at

  What will be the price of the company

The company's analysts predict that earnings (and dividends) will decline at a rate of 5% annually forever. Assume that r = 8% and Div0 = $2.00.

  Npv on project-riggs corp

Riggs Corp. management is planning to spend $650,000 on a new marketing campaign. They believe that this action will result in additional cash flows of $286,333 over the next three years. If the discount rate is 17.5 percent, what is the NPV on th..

  Should the old stemer be replace

To support the greater sales, the new machine would require that inventories increase by $2,900, but accounts payable would simultaneously increase by $700. parker marginal federal-plus-state tax rate is 40%, and its WACC is 14%. Should it replace..

  Determine how the given lease would qualify as capital lease

Determine how this lease would qualify as a capital lease. Prepare the amortization table for the lease and the entries for signing the lease on 1/1/07, the lease payment on 1/1/07.

  Employer and employee relationship concerning efficiency

How does "Social Justice" relate to the employer and employee relationship concerning Efficiency?

  What is the total impact of changes on nwc

We also see an expected increase of $8000 in accounts payable and a decrease of 2000 in account receivables. What is the total impact of these changes on NWC?

  Different terms of purchase

When shopping for the latest LCD TV you have been offered the same TV with two different terms of purchase.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd