FIN 302 Lecture Notes - Lecture 7: Total Order, Finished Good, Equifax
Document Summary
Use etf & edi: extend disbursements. Sales and marketing strategy (risk vs. reward: offer early payment discount. Sell to financially strong customers: perform credit evaluation. Know these pages 205 & 206 of text. Use industry credit reports (d&b, equifax etc) / average daily credit sales: ratio of bad debts to credit sales. Bad debts expense / credit sales: aging of accounts receivable. Prepare schedule of a/r by days past due (i. e. 0-30 days, 31 60 days, 61 90 days, > 90 days) Inventory management: raw materials, work in progress (wip) or unfinished goods, finished goods. There are 2 basic costs associated with inventory: ordering costs, carrying costs. Financing costs: damages, write-offs of obsolete, unsaleable stock. Minimize cost carrying cost, ordering cost. Satisfy customers avoid running out of inventory. Economic ordering quantity (eoq): optimal amount to order each time. Low point on the total cost curve: order size where total carrying costs equal total ordering costs (assuming no safety stock)
