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Evaluate Long Term Financial Decision on Dividend Payout Policy and Capital Structure and short- Term Financial Decision on Working Capital Management and Current Liabilities Management
Evaluate Long Term Financial Decision on Dividend Payout Policy and Capital Structure and short- Term Financial Decision on Working Capital Management and Current Liabilities Management Healthy Feedmil (FM) produces poultry feed in its 10 production facilities throughout Indonesia. The poultry feed produced in various forms such as pellet, mash and concentrate. Top revenues come from pellet-form feed product. Price of pellet-form feed per ton is IDR20.000.000. The company recorded the highest sales in 2019 of IDR40 billion, however, the sluggish year of 2020 only gave the company a recorded sales revenue of 16 billion The current sales level is 1000 tons. Due to slowing demand, raw material costs declined by 10% to IDR14.000.000/ton, while the fixed costs were recorded at IDR5.000.000.000. For 2021 onward, the company's new appointed board of directors decided to do some company restructuring programs including to change company's current credit policy as part of the cost restructuring plan. The company has identified the following one alternative: Credit policy. The second alternative would be for Healthy Feedmill to relax the credit policy level, in order to obtain 20% increase in unit sales. Average collection period will increase from 20 days to 30 days. An increase in bad-debt expenses from 1.5% of sales (the current level) to 3.0%. The cost of investment in account receivable is 15%. (Assumption: 1 year = 360 days) Required: Based on analysis should Healthy Feedmill change its current account receivable policy? Explain comprehensively
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