Please answer part 2 and explain thoroughly. Thankyou
Springsteen Manufacturing Working Capital Management, Part 2 After completing the short-term nancial plan for next year, Bruce Springsteen approaches you and asks about the company's credit policy. In looking at the competition, most companies in the industry offer credit to customers, so Springsteen Manufacturing appears to be one of the few companies that does not. Several customers have expressed the possibility of changing to a different supplier because of the lack of credit. Bruce is interested in knowing how implementing a credit policy will affect the short-term nancial plan for next year. Additionally, he would like you to inquire as to the possibility of getting improved credit terms for the company's purchases. To analyze the possible switch to the new credit terms, Bruce has asked you to investigate industry standard credit terms and rework the short-term financial plan assuming Springsteen Manufacturing offers credit to its customers. He would also like to investigate how better credit terms from the company's suppliers would affect the short-term nancial plan. QUESTIONS 1. You have looked at the credit policy offered by your competitors and have determined that the industry standard credit policy is If 10, net 45. The discount will begin to be offered on the rst day of the year. You want to examine how this credit policy would affect the cash budget and short-term nancial plan. If this credit policy is implemented, you believe that 60 percent of customers will take advantage of the credit offer and the accounts receivable period will be 24 days. Rework the cash budget and short-term nancial plan under the new credit policy and a target cash balance of $80,000. What interest rate are you effectively offering customers? 2. You have talked to the company's suppliers about the credit terms Springsteen receives. Currently, the company receives terms of net 45. Your suppliers have stated that they would offer new credit terms of 2/25, net 40. The discount would begin to be offered on the rst day of the year. What interest rate are the suppliers offering the company? Rework your cash budget and short-term nancial plan from the previous question assuming you take advantage of the discount offered