- This topic has 2 replies, 2 voices, and was last updated 10 years ago by
.
- Posts
Edden is a medium sized company producing a range of engineering products which it sells to wholesale distributors.Recently,it sales have begun to rise rapidly due to economic recovery.however,it is concerned about its liquidity position and is looking at ways of improving cash flow
its sales are $16 milllion pa,and average receivables are $3.3 million(representing about 75 days of sales)
Detemine the relative costs and benefits of using the factor in each of the following scenarios
(a)The factor will operate on a service only basis,administering and collecting payment from edden’s customers.This is expected to generate administrative savings of $100000 each year.the factor has undertaken to pay outstanding debts after 45 days,regardless of whether the customers have actually paid or not.The factor will mak a service charge of 1.75% of Edden’s turnover.Eden can borrow at an interest rate of 8% pa.PLEASE ANSWER AND EIXPLAIN THIS I WILL BE THANKFUL TO U.I am not going to answer the whole question here (presumably you have an answer anyway in the same book that you found the question).
You need to lists the costs and benefits per annum. If you watch the lecture on receivables management you will find that I work through a very similar question. Watching the lecture will show you how to do it, and will explain.
- You must be logged in to reply to this topic.