QUESTIONS

You have looked at the credit policy offered by

your competitors and have determined that the

industry standard credit policy is $\frac{1}{10},$ net $45.$

The discount will begin to be offered on the first

day of the year. You want to examine how this

credit policy would affect the cash budget and

short$-$term financial 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

financial plan under the new credit policy and a

target cash balance of $$80,000.$ What interest

rate are you effectively offering customers?

You have talked to the company's suppliers about

the credit terms Piepkorn receives. Currently, the

company receives terms of net $45.$ Your suppliers

have stated that they would offer new credit

terms of $\frac{2}{25},$ net $40.$ The discount would begin

to be offered on the first day of the year. What

interest rate are the suppliers offering the com$-$

pany? Rework your cash budget and short$-$term

financial plan from the previous question assum$-$

ing you take advantage of the discount offered.