Which credit terms should the cfo recommend

Assignment Help Finance Basics

Reference no: EM131407831

The CFO of JJ's Jungle Equipment has decided that the company must sell its products on credit. As a result, she is evaluating two credit terms. (1) Net 45, which would generate $50,000 in annual sales and have an average collection period (DSO) equal to 55 days. (2) Net 30, which would generate $48,000 in sales and have an average collection period equal to 36 days. The firm's variable cost ratio is 70 percent, and its average cost of funds 14 percent. Which credit terms should the CFO recommend? Assume all operating costs are paid when inventory is sold and all sales are collected at the DSO.

Reference no: EM131407831

Questions Cloud

What is the firm''s disbursement float : It normally takes three days for incoming checks to clear through the banking system, and outgoing checks generally clear in five days. What is the firm's disbursement float, collections float, and net float?

Find investment opportunities : Professional traders can find investment opportunities from day-to-day financial markets. Very often an investment strategy is required that determines how the investment should be planned across different days so that it can eventually lead to so..

Evaluate strategies for addressing these challenges : Conduct a 30-minute, semi-structured interview with a manager and identify common challenges and issues that arise in the workplace and evaluate strategies for addressing these challenges

What should their relationship be with local governments : What should the role of international organizations be in helping to shape the global economy? Do they help or hurt local economies? What should their relationship be with local governments?

Which credit terms should the cfo recommend : Which credit terms should the CFO recommend? Assume all operating costs are paid when inventory is sold and all sales are collected at the DSO.

How could war stimulate the economy : How could war stimulate the economy? Explain in detail, making sure to mention the impact government purchases have on Gross Domestic Product (GDP).

What is the total inventory cost at the eoq level : Michael's Mechanical sells 6,000 jettison machines annually. Each machine costs Michael's $2,000 to purchase, inventory carrying costs are 30 percent of the purchase price, and the cost of placing an order with its supplier is $120.

What excel application has been the most challenging : what Excel application has been the most challenging to date? We are mid-term and want to make sure everyone is comfortable with the skills and applications presented to date.

Develop a short paper critically analyzing key content : Students will develop a short paper critically analyzing key content. "Critical Thinking involves analysis, evaluation, and a synthesizing of facts, ideas, opinions and theories" (Jones, 2013). Use the material from the textbook.

User Account

All Pages