A company has annual credit sales of 6,00,00,000. The average collection period is 90 days. A factor offers to buy the receivables with a 2%…

CA Intermediate · Financial Management and Strategic Management · MTP · September 2025
A company has annual credit sales of 6,00,00,000. The average collection period is 90 days. A factor offers to buy the receivables with a 2% commission. The factor will advance on receivables to the company at an interest rate of 18% per annum after withholding 10% as reserve. Calculate the amount of advance to be paid assuming 360 days in a year.
(A) ₹ 1,32,00,000
(B) ₹ 1,28,92,500
(C) ₹ 1,40,38,500
(D) ₹ 1,26,06,000

Suggested Answer and Working Notes:

Correct Answer: Option (D)

₹ 1,26,06,000

Topics: Part B: Strategic Management

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