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Receivable Management

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Ovesh Malik
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12 views

Receivable Management

question bank

Uploaded by

Ovesh Malik
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
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{0 increase the credit period allowed to its customers from one month to is envisaged that the change in the policy as above will increase the sales by 8%. ‘areturn of 25% on its investment. You are required to examine and advice Credit Policy should be implemented or not. ‘& Company is making sales of Rs. 16,00,000 and it extends a credit of 90 days to its ‘However, in order to overcome the financial difficulties, it is considering to change the has a variable cost of 80% and a fixed cost of Rs. 1,00,000. The cost of capital is 15%. ¢ different proposed policies and which policy should be adopted? (year may be taken as GH), 2016} [B.com. (H), 2012 sales are Rs.15 lacs per annum and average collection period mS wh 10 increase sales by 10% and the average age of receivables: s return, should the firm relax its credit policy? in fixed cost by Rs. 50,000 on account of increase in sales beyond 15% of any plans a pre tax-return of 20% on investment in receivables. You are ost paying credit policy for the company. 1 (H). 2017] rN ‘an annual sale of Rs.10 lakhs and average collection period is 45 days. ‘The z shift in its credit policy. Following information is available: ‘cost is 60% of sales, Fixed cost is Rs.1 lakh per annum, Current bad debts are 1%, uired return on investment is 20%. following are the estimates of different credit policies: Average collection period 60 days 75 days 85 days Determine which credit policy the company should adopt. [Ans- Profit = Rs.1,70,000, 1,71,333.33, 1,64,266.67, 1,55,388.89] Question 9. [B.com. (H). 2016] X Lid. currently makes all the sales on credit and offers no cash discount. It is considering a 2% cash discount for payment with in 10 days. The firm’s current average collection period is 60 days, sales are 2,00,000 units, selling price is Rs.30 per unit, variable cost per unit is Rs.20 and average cost per unit is Rs.25 at the current sales volume It is expected that the change in credit terms will result in increase in sales to 2,25,000 units and average collection period will fall to 45 days. However. Due to increased sales, increased working ‘capital required will be Rs.1,00,000 (it does not take in to account the effect on debtors), Assuming that 50% of the total sales will be on cash discount and 20% is required return on investment. ould the proposed discount be offered? [Ans- Net profit af 60 days = 8,33,333, At 45 days = Rs.10,25,000]

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