I am earning a profit of 3% of selling price by lending credit to customer for 1month.Is it a gud business?

Question

I am earning a profit of 3% of selling price by lending credit to customer for 1month.Is it a gud business?

Answer 1

I suggest to get into Reliance Capital Shield plan, which will give you 100% capital guarantee and 16% of absoulte returns. But the tenure will be minimum of 6 months. If you are interested pls. do mail me [e-mail]. Closing date 30-07-2008

Answer 2

Absolutely not.

What is your turnover??

What is the extent of your capacity to give Credit??

The present rate for credit per month is 12% p annum minimum.

by giving credit of 1 month you loose 1% of profit from the 3% indicated.

Do you mean to say that from 2% you are able to meet all your business expenses and yet have substancial profits which is not possible.

Take the assistance of a cost accountant or a CA to guide you into factors related to your profits.

Answer 3

Yes great business

http://shaktibanna.blogspot.com/2008/07/...

Answer 4

The easist way to look at this is what would you do with the money if you had it today? If having no money today to have 3% more in 30 days is acceptable and gets you what you want, then it is 'okay' business....

In business, the concept you would be interested in is "present value of a dollar" vs "future value of a dollar". This basically establishes the fact that you can do more with a dollar in your hands today than you can with a 'promise' for someone to pay you a dollar in 30 days. The idea of offering a percentage 'penalty' or finance charge for paying later can lead to significant profit, but it can also lead to poor business performance.

Here is another way to think of it... How much has the cost of gas increased over the last 30 days? If the price has increased over that time, it is costing you MORE to do the same thing that you did 30 days ago. Now, take that practice and apply it to everything about your business. At this point you can determine how much your costs increase over a month span. If your costs increase by 3% over the 30 days, you are really only breaking even on that 3% finance charge... If the business costs increase by more than 3%, you are losing money by doing it...

Good luck.