Components of a Financial Plan
Financial planning is often confused with investment planning. Although investment planning is a major part of financial planning, it does not encompass the entire concept. There are several more components to financial planning as well. In this article, we will have a closer look at the various components of a financial plan. Budgeting: A lot […]
The Goodleap Business Model
When investors look at the list of companies that have become unicorns in the recent past, Goodleap tends to stand out. The company has stayed under the radar for a long period of time. It is only in 2021 that the company left the stealth mode and started publicizing some aspects of its business. It […]
FAQ’s About Behavioral Finance
Behavioral finance is a fairly recent phenomenon. The development of this branch of finance is not more than a few decades old. This is the reason why there is still a lot of ambiguity about behavioral finance. Investors still have a lot of questions about behavioral finance, which they would like to clarify. This is […]
Managing Money Laundering Risks in Commercial Banks
Up until now, we have seen various ways in which commercial banks are able to serve their corporate clients. Almost all the products and services created by commercial banks are created with the intention to serve their customers. However, corporate customers are not the only stakeholders that the banks have. Commercial banks are also answerable […]
Understanding Tax Terminology: Tax Rates
In the previous article, we discussed about how tax base calculations work. However, tax base calculations are just one part of the story. The other part of the calculation is the tax rate. Tax base and tax rate are multiplied to arrive at the tax amount owed by the organization. In this article, we will […]
It is a myth that financial ratios are to be used only by investors and analysts in deriving a fair valuation for the firm.
In reality, financial ratios are used by a wide variety of people for a wide variety of reasons. A common usage is by the sales department. Usually sales departments in large companies are converted to cash. Managers, therefore have to determine the optimum quantum of credit that must be given to the buyers to receive the fastest possible payment.
The following article will explain a common practice amongst sales managers to achieve a faster repayment from the buyers.
The sales managers have a fair degree of discretion in determining the credit to be given to the buyers. They however have to work within limits set by the organization. The parameter of these limits is usually determined by the following:
Based on a number of factors, the sales manager can give credit to the buyer. However, smart sales managers use ratios to their advantage and this is how.
The sales department can calculate the accounts payable turnover ratio from the buyers financial statements. This is the time that the buyer takes on an average to make payments to its suppliers. The sales manager can now design payment terms to induce the buyer to pay up at the earliest.
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