How should your willingness to grant credit be affected by differences in (a) The profit margin, (b)
Question:
How should your willingness to grant credit be affected by differences in
(a) The profit margin,
(b) The interest rate,
(c) The probability of repeat orders? In each case illustrate your answer with a simple example.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 50% (8 reviews)
a Other things equal it makes more sense to grant credit when the profit margin is high The expected ...View the full answer
Answered By
Rehab Rahim
I am well versed in communicating and teaching in areas of all business subjects. I have helped many students in different ways from answering answers to writing their academic papers.
5.00+
1+ Reviews
10+ Question Solved
Related Book For
Principles of Corporate Finance
ISBN: 978-0072869460
7th edition
Authors: Richard A. Brealey, Stewart C. Myers
Question Posted:
Students also viewed these Corporate Finance questions
-
How are foreign exchange rates affected by differences in the interest rates prevailing in various countries?
-
How is interest rate risk affected by a bonds maturity? How can investors use expectations of interest rate movements to their advantage?
-
Illustrate with an example how sole traders and partners are taxed in Australia. How does this compare to Australian company tax?
-
What functions are normally associated with the production cycle?
-
What happens to light when it falls on a material that has a natural frequency equal to the frequency of the light?
-
Early in this chapter, we identified five reasons for the historical growth in the size of benefits packages. Which of these reasons still affect the growth of employee benefits today? Which actually...
-
Consider an economy that is similar to that in exercise 7, but it has three types of individuals. An individual of type 1 succeeds with 90 percent probability, in which case her gross return of y1 =...
-
Sherwin Williams will receive $18,500 a year for the next 25 years as a result of a picture he has painted. If a discount rate of 12 percent is applied, should he be willing to sell out his future...
-
. The table below shows the operating costs (in thousands of dollars) of a small business from 2000 to 2005. Which model would fit this data best: quadratic, quartic, or logarithmic? Using the model,...
-
Consider incompressible flow in the entrance of a circular tube, as in Fig. P3.53, the inlet flow is uniform, u1 = Uo. The flow at section 2 is developed pipe flow. Find the wall drag force F as a...
-
Discuss ways in which real-life decisions are more complex than the decision illustrated in figure. How do you think these differences ought to affect the credit decision? Period 1 Poriod 2...
-
Why do firms grant free credit? Would it be more efficient if all sales were for cash and late payers were charged interest?
-
What is the most common reason for downsizing an organization? a. Increase sales. b. Improve arbitration efforts. c. Create greater operating efficiencies. b. Enhance the collective bargaining...
-
1. What is the best criterion of capital budgeting? 2. What is the problem with internal rate of return?
-
Briefly describe Harmonic Hearing Co., the hearing aid industry and the proposed transaction.
-
A researcher was interested in whether the mean hours of sleep differed by sex. The table below contains summary statistics for males and females in her class. You are asked to test (useAlpha= 0.05)...
-
A local TV repairs shop uses 36,000 units of a part each year (A maximum consumption of 100 units per working day). It costs P20 to place and receive an order. The shop orders in lots of 400 units....
-
Patrick purchased a used passenger automobile on June 1 , 2 0 2 3 . He paid $ 1 9 , 0 0 0 for the automobile. During 2 0 2 3 , he uses the automobile 7 5 % of the time for business. Patrick wishes to...
-
From the trial balance for Forlegco for 31 July 2010 (Exercise E2.3) (i) Prepare a simple income statement for July 2010. (ii) Has Forlegco made a profit in July? (iii) If Forlegco has not made a...
-
CLASS PERIO Solving Linear Equations: Variable on Both Sides Solve each equation. 1) 6r+ 7 = 13 + 7r 3) -7x-3x+2=-8x-8 5)-14 +66+7-26=1+5b 7) n-3n = 14-4n 2) 13-4x=1-x 4)-8-x= x - 4x 6)n+2=-14-n 8)...
-
Calculate G rxn and E cell for a redox reaction with n = 2 that has an equilibrium constant of K = 25 (at 25 C).
-
Construct a new version of Table 4.7, assuming that competition drives down profitability (on existing assets as well as new investment) to 11.5% in year 6, 11% in year 7, 10.5% in year 8, and 8% in...
-
Phoenix Corp. faltered in the recent recession but is recovering. Free cash flow has grown rapidly. Forecasts made in 2016 are as follows. Phoenix's recovery will be complete by 2021, and there will...
-
Construct a new version of Table 4.7, assuming that the concatenator division grows at 20%, 12%, and 6%, instead of 12%, 9%, and 6%. You will get negative early free cash flows. a. Recalculate the PV...
-
Contractor Proposal Cost Calculation Table COST ELEMENT CHANGE ($) Material $5,000.00 Subcontracts $3,000.00 Direct Labor $2,000.00 Indirect Expenses (Fringe Only) (28.33%) $566.60 Other Direct...
-
Harley has two lines of businessa manufacturing/retail operation and a finance subsidiary. Harley's dealers are independent of Harley and sell motorcycles and related products (e.g. Harley apparel)....
-
Autumn Manufacturing mass produces its product in three departments. A cost analysis for Department 1, the first department in the manufacturing cycle for the month of April, can be found in the...
Study smarter with the SolutionInn App