Case Study: Credit and Collection Corporation
Karen Allen
Financial Analysis and Planning
Mr. Hindman
April 5, 2005
Credit and Collection Corporation (CCC) is looking to offer stocks to a group of private investors. CCC manages and collects accounts receivables for three different types of customers. CCC uses a local CPA firm to prepare and given an opinion on its financial statements. To improve the favorability of the equity offer CCC has determined it needs an opinion on its financial statements from one of the Big Six CPA firms.
The first type of accounts receivable CCC purchases are delinquent accounts. CCC reviews a company's delinquent accounts receivables, removes problem and bankrupt accounts from the list and then assumes collection responsibility for the collection for a management fee of 30 percent. The second type of accounts receivables are current and delinquent accounts receivable. CCC reviews a company's accounts receivables then pays the company 95 percent of the value of the receivables selected. Any uncollectible accounts are exchanged with the company for new receivables or are purchased back from CCC by the company. The third type of account receivables are payments due to hospitals, clinics and doctors from third party payers. CCC reviews the accounts receivables to determine the amount that the third party payer will actually be paying. The provider is then paid 95 percent of the determined value and CCC collects from the third party payor. For each type of accounts receivable CCC generates dun letters and does follow-up collection calls.
The first Bi ...