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Ragha Co makes annual credit sales of $1,500,000. Credit terms are 30 days, but its debt administration has been poor and the average collection period has been 45 days with 1.5% of sales resulting in bad debts which are written off.
 
 
A factor would take on the task of debt administration and credit checking, at an annual fee of 2.5% of credit sales. Ragha would save $30,000 a year in administration costs. The payment period would be 30 days.
Factor will also reduce bad debt to 0.5% of the credit sales.
The factor would also provide an advance of 80% of invoiced debts at an interest rate of 14% (3% over the current base rate). Ragha can obtain an overdraft facility to finance its accounts receivable at a rate of 2.5% over base rate.
 

Requirements:

Should Ragha Accept the offer of factor?

Marks: 8

Answers submitted

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Kamrul Hasan's picture
Kamrul Hasan
11/02/2020 - 09:51

9990
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Rakhi Gupta's picture
Rakhi Gupta
10/30/2020 - 20:52

9958
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Nafeez Imtiaz Hossain's picture
Nafeez Imtiaz H...
09/27/2020 - 21:52

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Rakhi Gupta's picture
Rakhi Gupta
08/13/2020 - 02:50

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Nafeez Imtiaz Hossain's picture
Nafeez Imtiaz H...
06/15/2020 - 19:27

9242
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Apurba nandy's picture
Apurba nandy
03/02/2020 - 22:57

8974
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Anik Arbab
02/02/2020 - 20:45

8488
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Kamrunnahar Takia's picture
Kamrunnahar Takia
02/02/2020 - 20:49

8486
8
Md Ishtiak Isty's picture
Md Ishtiak Isty
02/02/2020 - 20:46

8482
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MD. Ohidur Rahman's picture
MD. Ohidur Rahman
02/02/2020 - 20:47

8496
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Md. Shadequl Islam Shamim's picture
Md. Shadequl Is...
02/02/2020 - 20:47

8494
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Md. Tariful Mursalin Rifat's picture
Md. Tariful Mur...
02/02/2020 - 20:49

8498
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Nafeez Imtiaz Hossain's picture
Nafeez Imtiaz H...
02/02/2020 - 20:46

8484
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Tanzeer UL Alaam's picture
Tanzeer UL Alaam
02/02/2020 - 20:45

8490
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Apurba nandy's picture
Apurba nandy
11/30/2019 - 02:49

8252
8
Apurba nandy's picture
Apurba nandy
11/30/2019 - 02:48

4543
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Kawsar Ahmed's picture
Kawsar Ahmed
09/21/2019 - 18:08

7438
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