Factors to consider in establishing effective credit policy
- Administration expenses
- Level of financing debtors
- Amount of discount to give
- Debt collection expenses
marto answered the question on February 11, 2019 at 11:21
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Date posted: February 11, 2019. Answers (1)
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a change of credit policy which will result in an increase in...(Solved)
Dawamu Ltd, which operates in the retail sector selling a single product, is considering
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of debts from one to two months. The relaxation of the credit policy is expected to
produce an increase in sales in each year, amounting to 25% of the current sales
volume. The following information is available.
1. Selling price per unit of product – Sh.1,000
2. Variable cost per unit of product – Sh.850
3. Current annual sales of product – Sh.240,000,000
4. Dawamu Ltd.'s required rate of return on investments is 20%.
5. It is expected that increase in sales would result in additional stock of
Sh.10,000,000 and additional creditors of Sh.2,000,000.
Required:
Advise Dawamu Ltd. on whether or not to extend the credit period offered to
customers, if
(i) All customers take the longer credit period of two months.
(ii) Existing customers do not change their payment habits and only the new
customers will take a full two months' credit.
Date posted: February 11, 2019. Answers (1)
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Date posted: February 11, 2019. Answers (1)
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Date posted: February 11, 2019. Answers (1)
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Date posted: February 11, 2019. Answers (1)
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Date posted: February 11, 2019. Answers (1)