flexible credit policy
This case focuses on the effect a flexible credit policy has on the profitability of an organization. The assessment for individual case 3 requires you to put yourself in the role of Ajai Joneja who is trying to decide whether or not applying a cash discount and the impact of this decision on JBS’s profitability. The workbook attached provides you with the template – there are multiple worksheets ensure you complete all.
Introduction: Introduce the case and detail important factors regarding the context of the industry and JBS’s fit within it.
Purpose: Describe the challenge/problem you face as Ajai Joneja and why an analysis of working capital will help in your cash discount decision.
Analysis Part A: Your analysis of the case should reference the findings you have calculated/completed as per the workbook template attached. Appendix A – Working Capital; Appendix B – Capital Ratios; Appendix C – Industry Comparison. Ensure you link your data to your written analysis.
Analysis Part B: i) Calculate the net impact (margin) if no discount is allowed using 2014/2015 fiscal year revenue and COGS. This assumes that revenue will increase by approximately 8%; COGS is 78.8% of revenue with no change in the future. Appendix D. Discuss.
ii) Calculate the net impact (margin) and if the cash discount is allowed using 2014/15 fiscal year revenue and use an assumption that revenue will increase 8%;10%;12%;14%;16%; that the cost of goods (COGS) can be taken as 78.8% with no change in the future. Keep in mind that your margin is going to be less the discount of 2% on 50% of sales. Determine the number of days the discount policy would reduce accounts receivable assuming 50% of customers will avail the 2% discount, paying A/R in 10 days; 40% will pay within 45 days; 10% will pay within 80 days. Appendix E. Discuss.
Alternatives: State the 2 alternatives detailing the pro’s and con’s of each of the two alternatives.
Recommendation: Indicate whether or not you have decided to apply the cash discount and support your answer.
Ensure that you are using appropriate paragraphing in your work. Each paragraph should contain one key point, support etc… This will keep your writing concise, create a stronger framework for communicating your idea’s and helps to avoid duplication of material.
· Format: Adhere to a concise Business Style of Writing, factual and without opinion till the conclusion and recommendations. Best to leave out adjectives and adverbs whenever possible.
· Style and organization: Headings should be used to divide and organization the various sections of your paper.
· Length: A maximum of 10 pages. The Appendices are not included in your total page count.
· Font: The text should use Times New Roman, 12-point font and double line spacing.
· Title Page: Report Title, Student name, submission date, Instructor name.
· Executive Summary: A summary paragraph enabling readers to quickly grasp the main elements of the report without having to read the entire report, is optional.
· Table of Contents: Sections in the report and associated page numbers.
· Introduction: Overview of the report.
· Purpose: Summary as to why you are writing this report in relation to the situation presented. Include the problem statement and summarize what you are attempting to accomplish through your analysis, and what you are communicating via the report.
· Analysis of the Situation and Alternatives: Critical assessment of the situation presented, perspectives considered, factors impacting the assessment of the situation, and the possible alternatives considered in the analysis.
· Conclusions: Summary of the main implications arising from your analysis.
· Recommendations: What recommendations follow as a result of the problem determination and its analysis?
· Appendices: Those tables, charts, references, technical diagrams, computations, and other supporting documents that speak to the situation and its analysis. The Appendixes are lettered rather than numbered (Appendix A, Appendix B, etc.), and listed in the table of contents. Appendices are referred to at the appropriate point in the body of the report as “Appendix x”.