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Assessing How Well Companies Manage Their
Pages 2 (502 words)
Hickory Company is managing its receivables better in 2006 than it did in 2005. The accounts receivable turnover ratio is higher in 2006 than in 2005. This means that the company is using its asset-average net receivables more effectively in 2006 than it did in 2005.
If a firm pays its bills with a 30-day delay, 2/3 of its purchases will be paid for in the current quarter. 5/6 of its bills will be paid for in the following quarter. If its payment delay is 60 days, 1/3 of its purchases will be paid for in the current quarter. 2/3 of its bills will be paid for in the following quarter.
The vice president's proposal of accepting consumer credit cards yields a higher contribution of $1,152,000 as compared to the sales manager's proposal of looser credit policies that yields a contribution of only $590,000. Therefore, Moorer Corporation would be better off under the vice president's proposal. Credit sales should not be abolished. Though credit sales would result in uncollectible accounts receivable, abolishing credit sales altogether would result in lost sales that might be more than the uncollectible accounts receivable. This is because it is common practice nowadays, especially in the sale of luxury consumer goods.
1. John Burton should develop a JIT inventory system. A JIT inventory system reduces in-process inventory and its associated cost (Just in time, n.d.). JIT manufacturing means making a good or service only when the customer, internal or external, requires it (Atkinson et al., 1996). The process is driven by a series of signals, or Kanban, that tell production processes to make the next part. ...
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