Cost of Preference Shares

Cost of Preference Shares Cost of Preference Shares The computation of the cost of preference share the cost of debt. The stipulate coupon rate of dividend on  reference   hares, like the interest on debt, constitutes the basis for the calculation of the cost. of preference shares. However, unlike  external payments on debt,  dividends payable on preference shares are not tax-deductible. Therefore, no adjustme


RECEIVABLES MANAGEMENT INTRODUCTION In the preceding Chapter, which was devoted to an in-depth examination of one of the most important components of current assets, that is, cash, it was observed that a basic strategy to reduce the operating cash requirement of a firm is to accelerate the collection of receivables so as to reduce the average collection period. The receivables represent an important ‘Compo

Type of Collection Efforts

Type of Collection Efforts The second aspect of collection policies relates to the steps that should he taken to collect overdues from the customers. A well-established ·collection policy should have as to the sequence of collection efforts. After the credit period is over and payment remains due. the firm should initiate measures to collect them. The effort should in the beginning be polite. but. with the pas


COLLECTION POLICIES The third area involved in the accounts receivable management is collection policies. They refer to the procedures followed to collect accounts receivable when, after the expiry of the credit period, they become due. These policies cover two aspects. (j) degree of effort to collect the over dues, and (ii) type of collection efforts. Degree of Collection Effort To illustrate the effect of the

Cash Discount

Cash Discount “The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions. Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities, equity, income and expenses are directly related to an or


CREDIT TERMS The area in accounts receivable management the credit terms. After the credit standards have been established and the creditworthiness of the customers has been management of a fine must determine the terms and conditions OR which trade credit will made available. ‘The stipulations under which goods are sold on credit are referred to as terms. These relate to the repayment of the amount under


Qualitative. The quantitative assessment should be supplemented by a qualitative subjective interpretation of the applicant’s creditworthiness. The subjective judgement. would cover aspects relating to the quality of management. Here, the references from other suppliers, bank references and specialist bureau reports would the basis for the’ conclusions to be drawn. In the ultimate analysis, therefor


Quantitative   Assessment of the quantitative aspects is based on the factual information available from the financial statements, the past records of the fine, and on. The first step involved in this type of assessment is to prepare an Agillg Schedule of the accounts payable of the applicant as calculate the average age of the accounts payable. This exercise will give a insight into the past .payment pattern

Trade References

Trade References These refer to the collection of information from finns with whom the  has dealings and who on the basis of their experience would vouch for the applicant. Credit Bureau Reports Finally, specialist credit bureau reports from organizations specializing supplying credit infonnation can also be utilized. . Analysis of Credit Information Once the credit infonnation has been collected from different

Financial Statements

Financial Statements One external source of credit information is the published financial state merits. that is. the balance sheet and the profit and loss account. The financial statements contain verv useful information They throw light on an applicant’s financial liquiditv. profitability and debt capacity. Although the financial statements do not directly reveal the part payment record of the applicant.