FI515Week7 - 4. Collection policy Our text does not make...

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Week Seven Homework- 200709 Chapter 22 Questions 22-2 and 22-4 Chapter 22 Problems 22-2 and 22-3 Question Answer 1. Transactions 2. Compensation to banks for providing loans and services No, a firm should want to have more cash on hand. The reason the texts gives is because a firm wants to be able to take advantage of trade discounts (discounts offered by suppliers for early payment of bills). Question Answer Credit policy elements: 1. Credit periods 2. Discounts 3. Credit standards
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Unformatted text preview: 4. Collection policy Our text does not make mention of how competition sets the credit policy. It says it is a controllable determinant and is set by either the credit manager or the executive committee. Problem Answer Receivables = DSO x Annual Daily Sales =17 x 3500 = $59,500 Problem Answer Nom ann cost = (discount / 100-discount) x (365/Days credit outstanding discount days) = .0309 x 24.33 = 75.26% EAR = (1 = .0309) 24.33 -1 = 109.8%...
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FI515Week7 - 4. Collection policy Our text does not make...

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