Robinson Company (recall their data from problems 2, 3, and 4) has a 2020 profit margin of 5 percent. They are examining the possibility of loosening their credit policy. Analysis shows that sales may rise 10 percent while bad debts on the change in sales will be 2 percent. The cost of financing the increase in current assets is 10 percent.

a) Should Robinson change its credit policy?

b) Using the information stated in the problem, at what profit margin is Robinson indifferent between changing the policy or maintaining its current standard?

c) Using the information stated in the problem, at what financing cost is Robinson indifferent between changing or maintaining the credit policy?

d) Using the information stated in the problem, by what amount can the current assets change so that Robinson is indifferent between changing or maintaining their credit policy?

Data from Problem 2

The Robinson Company has the current assets and current liabilities for the two years listed in the text. If sales in 2019 were $1.2 million and sales in 2020 were $1.3 million, and cost of goods sold were 70 percent of sales, how long were Robinson’s operating cycles and cash conversion cycles in each of these years? What caused them to change during this time?

Data from Problem 3

The Robinson Company from Problem 2 had net sales of $1,200,000 in 2019 and $1,300,000 in 2020.

Determine the receivables turnover in each year.

Calculate the average collection period for each year.

Based on the receivables turnover for 2019, estimate the investment in receivables if net sales were $1,300,000 in 2020. How much of a change in the 2020 receivables occurred?

Data from Problem 4

Suppose the Robinson Company had a cost of goods sold of $1,000,000 in 2019 and $1,200,000 in 2020.

Calculate the inventory turnover for each year. Comment on your findings.

What would have been the amount of inventories in 2020 if the 2019 turnover ratio had been maintained?