The credit policy variables that the firm decides changing to decrease the average collection period.

Question

Want to see the full answer?

Answer 1

Question

Chapter 18, Problem 10QTD

Summary Introduction

To discuss: The credit policy variables that the firm decides changing to decrease the average collection period.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

A company plans to tighten its credit policy. The new policy will decrease the average number of days in collection from 75 to 50 days and will reduce the ratio of credit sales to total revenue from 70% - 60%. The company estimates that projected sales would be 5% less if the proposed new credit policy is implemented. If projected sales for the coming year are P50 million, calculate the estimated peso change in the firm's account receivable balance caused by this proposed change in credit policy. Assume a 365-day year. [Answer format: INCREASE 1234567]

Provident Manufacturing recently began paying all of its invoices within 20 days of receipt, rather than its usual 30 days. How would this adjustment likely affect Provident's chances of receiving a bank loan in the near future? Provident would be less likely to receive a loan, because this adjustment would reduce the firm's current liabilities to a lower level than most banks like to see. O Provident would be less likely to receive a loan, because this adjustment suggests the firm does not anticipate having enough money to pay its debts in the months to come. O Provident would be more likely to receive a loan, because this adjustment would maximize the firm's current liabilities while minimizing its use of long-term debt. O Provident would be more likely to receive a loan, because this adjustment would minimize the firm's current liabilities while also showing the firm's ability to promptly pay off short-term debts.

A bank has estimated its expected (predicted) loan loss rate on its consumer loans at 3.25%. If the bank wishes to earn 8% on it consumer loans, what rate should it charge its customers?