International School of Business
ACKNOWLEDGEMENT
TABLE OF CONTENT
List of figures
List of tables
CHAPTER 1 – EXECUTIVE SUMMARY
CHAPTER 2 - PROBLEM IDENTIFICATION
2.1 Company Background
2.2 Situational analysis
Table 2.1. Revenue and profit after tax of THM
Figure 2.1. Return on assets of THM, Nam Phong and the industry
Figure 2.3. Decrease in sales and accounts receivable
Table 2.2. Percentage of accounts receivable on credit sales
Table 2.3. Receivables’ ratios of THMC
Figure 2.4. Receivable turnover ratio of THM, Nam Phong and the industry
Figure 2.6. Aging of THM’s accounts receivable in 2014
2.3 The first tentative problem: Trade credit policy
2.4 The second tentative problem: ineffective coordination
2.5 The third tentative problem: External effects
2.6 The real core problem: Trace credit policy
Figure 2.7. Factors cause the inefficiency in accounts receivable
CHAPTER 3 – SOLUTIONS
3.1 Alternative 1 - Change trade credit policy
3.2 Alternative 2 - Bank guarantee
3.3 Alternative 3 - Factoring accounts receivable
3.4 Selection of solutions
CHAPTER 4 - IMPLEMENTATION
CHAPTER 5 - CONCLUSION
CHAPTER 6 – SUPPORTING INFORMATION
6.1.2 Method of analyzing data
6.2 Definition of theoretical frameworks
6.2.1 Accounts receivable
6.2.2 Trade credit policy
6.2.3 Accounts receivable turnover
6.2.4 Days sales outstanding (DSO)
6.2.5 Cash conversion cycle (CCC)
6.3 Consequences of ineffective accounts receivable management
6.3.2 High accounts receivable effects on cash conversion cycle (CCC):
6.3.3 High accounts receivable makes increase in the costs
6.3.3.1 Opportunity cost:
6.3.3.2 Administrate cost:
6.3.3.3 Delinquency and default costs:
6.4 Transcript
Looking at Financial statement, we can see that the sales dropped too much in the four recent years. Would you please tell us the reasons of this drop?
The company experienced the decrease in profit in 4 years, even got lost in 2 last years. Beside the drop of sales, what other reasons for that?
Would you explain clearly how hard it is in collecting debt from customer? And what are the reasons for that?
How does the company grant credit to a customer?
So there is no credit standard for customer assessment?
How about other terms?
And how much discount rate do you offer for early payment?
How do you collect the due accounts receivable?
Do you apply a fine for late payment or use any legal actions to collect the debts?
Do you any other way to collect the overdue debt, especially the bad debts?
How long have you worked with THM company?
What are your standard to choose a supplier?
How about your company’s order amount? Is there any change recently? Why?
Some of the companies somehow delay their payment. Our bad debt rate keeps increasing recent years. Would you tell me some reasons for that delay?
Thank you for your sharing. We really appreciate that.
APPENDIX
Appendix 4: Balance sheet of Nam Phong