Credit management

imdad1 · 08-07-2010, 03:48 AM

i am not having pen page and calculater although i can guide u steps to solve this question first of all keep cost of goods computed by bringing the owed amount (eg sales) to cogs and plot it at point "0" than plot month wise cash flows and show recovery at 5th month than compute IRR .this IRR is revised rate of return considering the delay in recovery. now campare the actual rate of return given in the question with required rate of return and the difference would be additional cost of extension/ Delay

<blockquote id="quote">quote<hr height="1" noshade id="quote">hOriginally posted by hinanifaf
 Good Day All
Part A
A debtor age analysis reveals that a customer has owed R90 000 for 2months longer than the credit policy of 3 months.The company marks up all goods by 60% on cost and has a required rate of return of 18%.What will be the additional cost to the company of not receiving payment on time.

Part B
A supplier offers the following terms of payment, 5/1 month,net 3 months. The bank charges interest at the rate of 20% per annum on borrowings.Now the question is ,determine if it is of benefit to the firm to pay the supplier earlier.

Please any one who can solve this for me, i will appreciate it very much
Flora

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