Precor Sells Exercise Equipment to Thousands of Health Clubs and Sporting

Multiple Choice

Precor sells exercise equipment to thousands of health clubs and sporting goods stores around the world.Its average order size is about $3,500.Which of the following techniques would you recommend to Precor to deal with its credit risk?

A) insure the receivables through the FCIA,which will charge a 1.2% fee to cover 90% of the receivables
B) use a factor,who will charge a 1.3% export factoring fee
C) request letters of credit from customers.The customers will have to pay $75 plus 0.5% for each letter of credit.To remain competitive,Precor will have to reduce its prices to reimburse customers for their L/C costs
D) all are about equally acceptable