Inventory and Credit Decisions Under Inflationary Conditions With Inflation Induced Bad-Debts

2018 ◽  
Vol 9 (3) ◽  
pp. 52-76
Author(s):  
K.K. Aggarwal ◽  
Arun Kumar Tyagi
Keyword(s):  
Default Risk ◽  
Time Value Of Money ◽  
Credit Period ◽  
Time Value ◽  
Joint Determination ◽  
Proposed Model ◽  
Net Profit ◽  
Inventory Decisions ◽  
Value Of Money

This article describes how a credit period, through its influence on demand, becomes a determinant of inventory decisions; therefore, inventory decisions should be determined jointly with credit decisions. Inflation and time value of money affects valuation of investments; hence their effect should not be disregarded in decision-making. Selling on credit exposes a firm to an additional dimension of default risk from customers as a result of inflation. Consequently, this article presents a mathematical model for the joint determination of optimal inventory and credit decisions for a day-terms credit-linked demand by incorporating the effects of inflation and the time value of money. It is assumed that an increase in the rate of inflation leads to an increase in bad-debts. The objective of the model is to maximize the present value of a firm's net profit per unit of time by jointly optimizing the day-terms credit period and order interval. A numerical example, sensitivity analysis, and observations are presented to illustrate the effectiveness of the proposed model.

IMPERFECT PRODUCTION SYSTEMS WITH IMPERFECT PREVENTIVE MAINTENANCE, INFLATION, AND TIME VALUE OF MONEY

2006 ◽  
Vol 23 (01) ◽  
pp. 89-105 ◽  
Author(s):  
M. A. DARWISH
Keyword(s):  
Preventive Maintenance ◽  
Production Systems ◽  
Production Quality ◽  
General Distribution ◽  
Time Value Of Money ◽  
Time Value ◽  
Proposed Model ◽  
And Shifts ◽  
Value Of Money ◽  
Control State

A model that integrates the issues of production, quality, maintenance, inspection, inflation, and time value of money is proposed in this paper. It is assumed that the production system starts in the in-control state producing items of high or perfect quality. However, the process may deteriorate with time and shifts at a random point in time to an out-of-control state and begins to produce non-conforming items. The elapsed time for the process to shift to the out-of-control state is assumed to follow a general distribution. Imperfect preventive maintenance, restoration, and inspection errors are taken into account. Also, inflation, time value of money, and shortage are considered in the proposed model. Numerical examples are presented to illustrate important aspects of the integrated model.

scholarly journals Inventory and Credit Decisions under Day-Terms Credit Linked Demand and Allowance for Bad Debts

2014 ◽  
Vol 2014 ◽  
pp. 1-11 ◽  
Author(s):  
K. K. Aggarwal ◽  
Arun Kumar Tyagi
Keyword(s):  
Logistic Function ◽  
Discounted Cash Flow ◽  
Accounts Receivable ◽  
Credit Period ◽  
Proposed Model ◽  
Net Profit ◽  
Demand Rate ◽  
Explicit Consideration ◽  
Inventory Decisions ◽  
Bad Debt

In order to stimulate demand of their product, firms generally give credit period to their customers. However, selling on credit exposes the firms to the additional dimension of bad debts expense (i.e., customer’s default). Moreover, credit period through its influence on demand becomes a determinant of inventory decisions and inventory sold on credit gets converted to accounts receivable indicating the interaction between the two. Since inventory and credit decisions are interrelated, inventory decisions must be determined jointly with credit decisions. Consequently, in this paper, a mathematical model is developed to determine inventory and credit decisions jointly. The demand rate is assumed to be a logistic function of credit period. The accounts receivable carrying cost along with an explicit consideration of bad debt expense which have been often ignored in previous models are incorporated in the present model. The discounted cash flow approach (DCF) is used to develop the model and the objective is to maximize the present value of the firm’s net profit per unit time. Finally, numerical example and sensitivity analysis have been done to illustrate the effectiveness of the proposed model.

What Does Corrosion Really Cost?

CORROSION ◽  
1956 ◽  
Vol 12 (12) ◽  
pp. 68-70
Author(s):  
W. B. HIRSCHMANN
Keyword(s):  
Time Value Of Money ◽  
Time Value ◽  
The Cost ◽  
Value Of Money

Abstract Determination of the cost of corrosion is not a simple, straightforward job. A part of the problem depends on what is meant by corrosion and what is meant by cost. This paper is a guide for isolating the cost of corrosion. By also taking into account the effects of taxes and the time value of money, a measure is obtained of the cost of corrosion which is credible, and which is meaningful in relation to other costs and the net earnings of an organization. 1.2.2

The Time Value of Money Concept in Islamic Finance

2006 ◽  
Vol 23 (1) ◽  
pp. 66-89
Author(s):  
Abu Umar Faruq Ahmad ◽  
M. Kabir Hassan
Keyword(s):  
Basic Element ◽  
Islamic Finance ◽  
Purchasing Power ◽  
Conventional Theory ◽  
Modus Operandi ◽  
Time Value Of Money ◽  
Time Value ◽  
Value Of Money ◽  
Future Date ◽  
Rule Out

The time value of money is a basic investment concept and a basic element in the conventional theory of finance. The Shari`ah does not rule out this consideration, for it does not prohibit any increment in a loan given to cover the price of a commodity in any sale contract to be paid at a future date. What is prohibited, however, is making money’s time value an element of any lending relationship that considers it to have a predetermined value. Here, the Shari`ah requires that a loan be due in the same currency in which it was given. The value (i.e., purchasing power) of paper currencies varies due to changes in many variables over which the two parties of a loan contract usually have no control. This study examines possible modus operandi of time valuation according to the Shari`ah’s precepts vis-à-vis the concept of money, and whether any value can be attributed to time while considering money’s value. For this purpose, it investigates the juristic views on such relevant issues as the permissibility of difference between a commodity’s cash and credit prices and an increase and reduction of the loan’s amount in return for early repayment.

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