You have looked at the credit policy offered by your competitors and have determined that the industry standard credit policy is 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?
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