What are the elements of a firm’s credit policy? To what extent can firms set their own credit policies as opposed to having to accept policies that are dictated by “the competition”?
Answer to relevant QuestionsThe Cristo Candy Corporation carries an average balance of inventory equal to $400,000. The company’s cost of goods sold averages $4.5 million. What are Cristo’s (a) Inventory turnover (b) Inventory conversion period?The accounts payables of Momma’s Baby, Inc. generally equal $1.6 million. If the turnover of accounts payables is 20, what is its (a) Payables deferral period (DPO) (b) Annual credit purchases?Calculate the APR and the rEAR of nonfree trade credit under each of following terms. Assume payment is made either on the last due date or on the discount date.a. 1/15, net 20b. 2/10, net 60c. 3/10, net 45d. 2/10, net 45e. ...The Pettit Corporation has annual credit sales of $2 million. Current expenses for the collection department are $30,000, bad debt losses are 2 percent, and the days sales outstanding is 30 days. Pettit is considering easing ...Ray now asks you to examine his company’s credit policy to determine whether changes are needed. One of his employees, who graduated recently with a finance major, has recommended that the credit terms be changed from ...
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