Please answer all of the questions in full and show calculations.
Options A - C:
Invoice Amount
Discount Period
Percent Cash Discount
Option D:
Credit Period
Discount Period
365 days per year
Option E:
Invoice Amount
Percent Cash Discount
365 days per year
Day 10 Options: 1,520.83 , 76.04 , 0
Day 11 Options: 1,520.83 , 121.66 , 114.06
Day 20 Options: 136.87 , 152.08 , 114. 06
Day 30 Options: 0 , 60.83 , 76.04
Extensive Enterprise Inc. is a relatively small player in its market. Its new Chief Financial Officer (CFO), Riley McKenzie, has suggested that its credit policy may be one possible source of the company's lower-than-desired sales This is because Extensive currently sells a of its product on either a cash on delivery (COD or a cash before delivery (CBD) basis, depending upon the buying volume of the customer. Riley observed that one possible strategy to increase Extensive's sales is to offer trade credit to its most creditworthy customers. Offering trade credit will involve both risks and returns to Extensive. Consider this, and indicate whether the following questions are true or false Extensive can offer credit terms without offering a cash Trade credit is free to Extensive's customers, discount regardless of when they elect to make their payments since it does not require the payment of interest. This statement is: This statement is: O False O True O True O False Last week, Riley met with several of the firm's larger, more creditworthy customers, including the Florence Fashion Footwear Inc. (FFF). In the course of this meeting, she suggested terms of 4/10 net 20, but two things became quickly apparent: Not everyone remembered how to calculate the cost of trade credit, so a review of the equation should be conducted; and While everyone acknowledged that these terms are consistent with the industry's standards, they are concerned with the magnitude of the implicit costs associated with paying on various dates throughout the credit period Therefore, you need to do two things: Identify the individual elements in the annual financing cost of trade credit equation; and Calculate the implicit costs of paying on several dates throughout Extensive's credit period Begin with the identification of the variables in the annual financing cost of trade credit equation. Then, use the equation to compute the annual financing cost of the trade credit assuming that the invoices are paid on the indicated days. Remember, Riley suggested terms of 4/10 net 20 Variable A Variable E Cost of Trade Credit 100 variable C (Variable B Variable D Extensive Enterprise Inc. is a relatively small player in its market. Its new Chief Financial Officer (CFO), Riley McKenzie, has suggested that its credit policy may be one possible source of the company's lower-than-desired sales This is because Extensive currently sells a of its product on either a cash on delivery (COD or a cash before delivery (CBD) basis, depending upon the buying volume of the customer. Riley observed that one possible strategy to increase Extensive's sales is to offer trade credit to its most creditworthy customers. Offering trade credit will involve both risks and returns to Extensive. Consider this, and indicate whether the following questions are true or false Extensive can offer credit terms without offering a cash Trade credit is free to Extensive's customers, discount regardless of when they elect to make their payments since it does not require the payment of interest. This statement is: This statement is: O False O True O True O False Last week, Riley met with several of the firm's larger, more creditworthy customers, including the Florence Fashion Footwear Inc. (FFF). In the course of this meeting, she suggested terms of 4/10 net 20, but two things became quickly apparent: Not everyone remembered how to calculate the cost of trade credit, so a review of the equation should be conducted; and While everyone acknowledged that these terms are consistent with the industry's standards, they are concerned with the magnitude of the implicit costs associated with paying on various dates throughout the credit period Therefore, you need to do two things: Identify the individual elements in the annual financing cost of trade credit equation; and Calculate the implicit costs of paying on several dates throughout Extensive's credit period Begin with the identification of the variables in the annual financing cost of trade credit equation. Then, use the equation to compute the annual financing cost of the trade credit assuming that the invoices are paid on the indicated days. Remember, Riley suggested terms of 4/10 net 20 Variable A Variable E Cost of Trade Credit 100 variable C (Variable B Variable D
