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Financial Account Receivable Formula

   

Financial Account Receivable Formula


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Additional profit

(proposed plan sales – current plan sales) X sale price


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Cost of marginal investment under A/R

(variable cost X Proposed sales) / (days in year / proposed collection days)


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(-) average investment under current plan

(variable cost X current sales) / (days in year / current collection days)


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marginal investment in A/R

(investment under the proposed plan- investment undercurrent plan) X opportunity cost


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cost of marginal bad debts

-bad debts under the proposed plan

(proposed sales X sales price proposed bad debt percentage)

-bad debt under the current plan

(current sales X sales price current bad debt percentage)


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Cost of marginal debts

(bad debts under the proposed plan- bad debt under the current plan)


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Net profit from implementing the proposed plan

(additional profit contribution - cost of marginal investment under A/R – cost of marginal bad debt)

 

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Positive is profit (good plan)-implement

Negative is loss (bad plan)- not implement

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