PCC may07 attempt question of financial mangement

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manish bairagi (Querist)
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14 June 2008 Sales Rs.120lac of which 75% on credit, contribution ratio is 20%.The credit terms are 2/3 net 30.Current bad debts are 1%, Companies administration cost is Rs.120000.Past Experience indicate that 60% of the customes avail the cash discount.the remaining customers pay on an average of 60 days sfter the date of sales.the debtors of the company are presently being financed in the ratio of 1:1 by a mix of bank borrowing & own funds which costs 15% & 14% resp.afactoring firm offered to buy the debtors on the following terms:-

1. Factor reserve 12%.
2. Guranteed payment 25 days
3. Interest Charges 15%.
4. Commission 4%.

(answers are, Cost in house= Rs. 426750
Cost of Factoring= Rs. 452780
Net Loss= Rs. (26030)

Please give me the solution of this question.With the logic.

plz mail me at manishbrg@yahoo.co.in

Taranjit Singh

Taranjit Singh (Expert)
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29 September 2009 If this query is still pending then please post it again by updating......Good wishes.....or you can also send me a PM.
Otherwise it is already resolved.

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