Considering tightening of its credit standards

Assignment Help Financial Management

Reference no: EM131360190

A local Estonian company is considering tightening of its credit standards. The only product it offers to customers is a local popular drink called "kihisev kalamees". The sales price per bottle is 4 EUR/unit. All sales are directed to export and are credit sales. PK expects to sell 600,000 bottles next year. The variable costs per bottle are 3 EUR. current credit standards are such that 50% of the customers pay in 30 days and the rest of the customers in 60 days. According to the new policy, the company introduces uniform credit period for all customers, which is 20 days. The company forecasts that as the result of policy change the sales decrease by 8%. Moreover, losses from bad debts are expected to decline from current 4% level to 2% level if sales revenue. the company finances its accounts receivables (A/R) by short-term loans that carry 10% interest rate

FIND SOLUTIONS TO (SHOW ALL STAGES OF CALCULATIONS)

a) gross profits before and after the policy change

b) the amount invested into receivables before and after the policy change

c) change in the financing costs of receivable (using 10% interest rate)

d) change in the bad debt losses

e) finally, try to analyse, should the company change its credit standards based on the information given above.

Reference no: EM131360190

Questions Cloud

Find the market value of equity and cost of equity : (Cost of Capital) The company has 100 000 shares outstanding. The shares are listed in a stock exchange and currently trade at 15 Dollar per share. The risk free interest rate is currently 3% and the market risk premium is estimated to be 5%. Find Ma..

Write me a speech based on the format : To be used in the speech, for the speech checklist, and on the exam. You must turn in an outline the day ofyour speech. The outline can be your notecard, in this format - Write me a speech based on the format

Identify the global societal problem : Identify the global societal problem within the introductory paragraph and conclude with a thesis statement that states your proposed solution(s) to the problem.

Analyze a recent conversation you had with a person : Analyze a recent conversation you had with a person of a different culture. Or, if you haven't had this type of conversation recently, find a video clip online that focuses on people from different cultures communicating and analyze the clip.Prov..

Considering tightening of its credit standards : A local Estonian company is considering tightening of its credit standards. The only product it offers to customers is a local popular drink called "kihisev kalamees". The sales price per bottle is 4 EUR/unit. All sales are directed to export and are..

What is the fastest way to manufacture old oregon tables : What is the fastest way to manufacture Old Oregon tables using the original crew? How many could be made per day? Would production rates and quantities change significantly if George would allow Randy to perform one of the four functions and make o..

Explain how an organization labor relations : Explain how an organization's labor relations (relations between businesses and unions) and employee relationspolicies and practices impact the organization's total rewards programs. Your answer will require that you write approximately 3-4 paragra..

What type of performance appraisal : Think about your personal experience with performance appraisals and respond to the following questions. You may choose to respond as though you were being appraised or you were conducting an appraisal. 1. What type of performance appraisal was c..

Why did global green books publishing struggle : Briefly describe the Global Green Books business. Why did Global Green Books Publishing struggle? What were the specific PM solutions that were introduced by Samantha that worked?

User Account

All Pages