Question

ABC Ltd. has a total sale of Rs 6.2 cores and its average collection period is 80 days.

The past experience indicates that bad debt losses are 3.5% on sales. The expenditure

Incurred by the firm in administering its receivable collection efforts are 8 lakhs. A

Factor is prepared to buy the firm’s receivables by charging 5% commission. The factor

Will pay advance on receivables to the firm at an interest rate of 18% p.a. after with

Holding 18% as reserve. Calculate the effective and cost of factoring to the firm and

Effective interest rate to the firm.​

Answer 1

Answer:

47%

Step-by-step explanation:

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