Net credit sales

Although companies do not usually report credit sales, it is still important to recognize the importance of credit sales. Selling on credit is the basis for accounts receivables and for uncollected payments. 

Just because a company sells its products and services, fully expecting to be paid, the reality is that it may not receive payment. 

Net credit sales are revenues from credit sales less sales returns and sales allowances. If a company ships goods of poor quality or that do not meet the customers specifications, it typically has two choices to immediately rectify the situation. It can allow the customer to return the products, in which case all revenue from this sale is lost. Another option is to provide a reduction in the price charged to the customer, thus salvaging a portion of the revenue the company expected to collect from the sale. 

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Accounts receivable turnover = Net credit sales/Net accounts... 

Table 3.6 gives numerical values for material quantities, unit costs or credits, and total direct costs or credits involved in each fuel-cycle step and calculates the overall net direct cost for lot 2A as 26.4 million. A total of 27.8 million is paid out for UF and fabrication in transactions 1 and 2 before any revenue is received from the sale of electricity. Because of this delay in receiving revenue, the total fuel-cycle cost includes also charges for carrying the 27.8 million advanced several years before it is recovered through revenue from the sale of electricity. Similarly, there is a financing charge on the net credit of 1.4 million in steps 3 throu 6, delayed until after revenue is received from the sale of electricity. 

The cost of on-farm ethanol production decreased as processing plant size increased, from a net ethanol cost of 0.55 11 with a plant capacity of 3 x 105 kg feedstock to 0.21 -l-1 for a plant capacity of 4 x 106 kg feedstock (Kosaric et al., 1982). Raw material (Jerusalem artichoke tops and tubers) and by-product credits, from the sale of protein-rich pulp and stillage, remained constant, while fixed operating costs (e.g., depreciation, maintenance, labor, and taxes) were considerably reduced for a larger plant size (Table 14.4). For a plant with a capacity of 4 x 106 kg, ethanol cost was estimated to be about 40% of the price of gasoline in Canada in 1995 (Kosaric and Vardar-Sukan, 2001). 

Production costs per tonne of base oil are calculated by dividing the total annual costs by the total annual production of base oils. Net feedstock cost can be calculated in several ways, but it will not necessarily be identical to the cost of crude oil. As the base oil plant in a sense competes with fuel production units for feedstock, the basic feedstock cost to the lubricant base oil complex should be determined by the alternative value of that feedstock if it were used to make mainstream fuels products. The by-products of base oil manufacture also have values for blending into fuel streams or in some cases for direct sale as speciality products, such as waxes and bitumen. Credit must be given for these products so that the net value of the hydrocarbon content of the base oil can be calculated. Refineries use sophisticated linear programming computer models to optimise refinery operations based on different crude oil input, process yields, market prices, production targets, etc. 

The analysis should also reflect the effect of taxes on cash flows. R D expenses result in tax deductions and other credits that reduce taxes, while the net revenues from sales must be reduced by the taxes they cause to be paid. 

The net sale price for white sulfuric acid will vary greatly depending on smelter location and proximity to acid markets, but by way of example may be taken as US 20/t ex works. This represents a credit of 0.865 x 20 = 17.3/t of lead produced, whereas as black acid the return will be around 8.65/t of lead produced. 

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