Determine the Break-Even Probability of Collection for the Following Seller

question 66

Essay

Determine the break-even probability of collection for the following seller: $2,000 average invoice, 64% costs, 1% per month opportunity cost of capital.Assume that production costs were just paid and that receivables are outstanding an average of two months.Given these characteristics of credit, what is the expected profit from a customer that is perceived to offer an 85% probability of collection?

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Definitions:

Competency Evaluator

A professional tasked with assessing an individual's ability to understand and participate in legal proceedings or to perform certain tasks or roles effectively.

Defendant

An individual, company, or institution sued or accused in a court of law.

Competence

The ability or capacity to do something effectively or to a required standard; often refers to a specific skill or set of skills.