The three companies shown below have gathered data to determine whether they should factor their accounts receivable.
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Prepare calculations for each company to determine the total cost of collecting its own receivables.
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verage annual accounts receivables Average collection period in days Annual bad debt write-offs Marginal interest rate for accounts receivables % factor fee on receivables % of receivables advanced by factor Interest rate charged by factor Reduced collection period with factor in days Annual accounts receivable credit administration savings Larry Ltd Curly Ltd. Moe Ltd. 375,000 $125,000 $65,000 75 $6,000 7% 4% 85% 3% 30 $5,000 42 $22,000 10% 10% 90% 5% 20 $2,000 $8,000 15% 6% 80% 2% 25 $6,000
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Related Book For
Financial Management for Decision Makers
ISBN: 978-0138011604
2nd Canadian edition
Authors: Peter Atrill, Paul Hurley
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