CREDIT AND COLLECTION CASE STUDY ALLIED PRODUCTS, INC In the summer of 1992, Amax Corporation had completed an ambitious P100 million expansion program which would allow Amax to sell special alloy bars and sheets for various specialty metal products manufacturing shops in Metropolitan Manila. Amax estimates its market for such special alloys to run up to P250 million per annum, boosting its sales by over P20 million per month. The net profit on such products, after deducting plan operating costs and general selling and administration expenses, would be 10%, a net addition to the already existing profitable product lines of the company. In the past year, Amax had sales of P1 billion and a net profit of P805 million and the bad debt losses were, as usual, less than 5 percent. Amax believes that its new special alloy bars and sheets could not only add another P250 million in new product sales but could open up a vast reservoir of new demand which in 2-3 years could help double the company's present sales volume and profits. Sales Department, therefore, presented Credit Department with a list of firms which they believed were typical of the new batch of small manufacturing companies was investigated forthwith by Credit Department. Within the week, Rosman Credit Investigation Services submitted to Amax its report on Allied Products, Inc., and Sales Department pressed Credit Department for a decision to sell Allied on 30-days credit an initial supply of 1,200 kgs valued at P 200,000.

Questions: 1. If you were the Credit Manager, what would you have done? 2. What considerations would you take into account in reaching your decision 3. What analytical procedures would you undertake to reach a decision?