Automation in Retail Stores
In the previous few articles, we have already studied the concept of automation as it related to retail warehouses. However, it is important to realize that warehouses are not the only place in the retail sector where automation is possible. Over the past few years, the usage of technology in the retail space has rapidly […]
The Uglier Side of Fracking
The press releases by the United States oil companies will have you believe that fracking is the best thing that has been discovered since “fire”! The newspapers are full of praise for the new technique and how it is likely to bring back the glorious days when America was self-reliant with regards to energy. However, […]
Why Managing Liquidity is Important for Pension Funds?
Pension funds have traditionally been viewed as long-term investors. They are an investment vehicle in which individuals invest over the course of their working lives and remove money only after the age of retirement. Hence, liquidity was not considered to be a very big problem for the pension fund industry until recently. However, in the […]
Debt Funding in Sports Franchises
Sporting franchises are also business organizations that operate just like other business entities. Therefore, just like other business entities sports franchises also require debt in order to fund their business. There have been various institutions such as banks and private equity firms that can provide these required loans to sporting franchises. Prima facie, it may […]
Paper-Work in Job Order Costing
Quotation: The job begins with a quotation given to a client. For the client, all that matters in the quotation are the costs involved. However, for the contractor, quotation is almost a research document. Giving out quotations requires estimation. Contractors usually have fixed methodologies for estimating these costs. A study of past quotations can tell […]
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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