Ruston Manufacturing Company is a small firm selling entirely on a credit basis. It has experienced operation and earned modest profits. Sales are made on the basis of ne 30 days. Collections from customers 70 percent in 30 days, 20 percent in in 90 days, and 3 percent bad debts. in't broke, don't ccess in paying id to use a cash answer. small firm selling rienced successful t payment in run approximately 60 days, 7 percent The owner has considered the possibility of offering a cash discount for early payment. However, the practice seems costly and possibly unnecessary. As the owner puts it, “Why should I bribe customers to pay what they
Question 1 Is offering a cash discount the equivalent of a bribe?
Question 2 How would a cash discount policy relate to bad debts?
Question 3 What cash discount policy, if any, would you recommend?
Question 4 What other approache improve cash flows from receivables?