August 2011
Beginner
547 pages
16h 12m
English
Content preview from Fundamentals of Financial Management, Third EditionBecome an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
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POINTS TO REMEMBER
- What are the benefits of the credit sale/maintaining accounts receivable?
- Greater sales leading to greater profitability
- Absorption of fluctuation in demand
- Providing liquidity to the firm
- Effective tool for price discrimination
- Encouragement to intermediaries
- What are the costs of maintaining accounts receivable?
- Financing cost or the interest cost during the period when cash is tagged with receivables
- Administrative cost
- Collection cost
- Bad debt losses
- How do you optimise the terms of the credit?
- A particular credit term is optimal when:
- Net profit calculated through proforma income statement is the highest
- Expected rate of return, meaning the incremental tax-adjusted operating profit divided by the additional investment ...
- A particular credit term is optimal when:
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