Redit & Financial Analysis (As it relates to MANUFACTURING)

Please answer the following Credit and Financial questions as they relate to MANUFACTURING: Also please number each answer: Example: Question #1 -Answer #1.

1. You sell a novelty item incorporating Christmas motif.
In what way might your credit policy vary through the last half of the calendar year to prevent you from carrying over a large amount of inventory?

2. Your distributor files for bankruptcy.
Would you be in a better position if you sold to this customer on open account terms or shipped on a consignment basis? Explain.

3. Two companies, A and B, differ in the nature of their business only in the ways that are mentioned below.
Indicate which company is likely to be the better credit risk by writing Aor B next to each of the following and explain:

a.) Both companies are wholesales of dry goods, but A is located in Philadelphia and B in Omaha.

b.) Company A manufactures womens hats; Company B manufactures womens sportswear  sweater, skits, blouses, etc.

c.) Company A manufacturers only against confirmed orders while company B produces inventory before receiving any orders.

d.) Company A plans to produce automobiles and B, auto accessories. Both have starting capital of $10,000,000.00

e.) Company A manufactures an unbranded product. Company B makes the same product under an advertised brand name.

4.) In each of the following situations, indicate whether your credit policy would become MORE LIBERAL or MORE RESTRICTIVE and explain why.

a.) Due to economic conditions, your backlog of customer orders has fallen far below what is considered a desirable level.

b.) An improved version of your only product, due on the market in six months, will make your present inventory obsolete.

c.) A general shipping strike unexpectedly prevents receipt of critical raw materials.

d.) Your bad bebt losses during the past year have been practically zero, but sales have been only average.


5.) While your manufacture a product in standard size, you will also materially modify that product to customer specifications.
What credit policy might you adopt on this CUSTOMIZEDwork?