If a firm’s credit period is decreased, the sales volume can be expected to ________, the investment in accounts receivable can be expected to ________, and the bad debt expenses can be expected to ________. A) increase; decrease; decrease B) increase; increase; decrease C) increase; increase; increase D) decrease; decrease; decrease ANSWER D
An increase in accounts receivable turnover due to an increase in collection efforts will decrease a firm’s marginal investment in accounts receivable. Indicate whether the statement is true or false ANSWER TRUE
Accounts receivable due over 90 days total ________. (See Table 14.6) A) $200,000 B) $470,000 C) $300,000 D) $100,000 ANSWER C
A decrease in collection efforts will result in an increase in sales volume, an increase in the investment in accounts receivable, an increase in bad debt expenses, and a decrease in collection expenditures. Indicate whether the statement is true or false ANSWER TRUE
An evaluation of the firm’s collection efforts based on the aging schedule would suggest ________. (See Table 14.6) A) poor credit management B) satisfactory credit management C) superior credit management D) overzealous collection efforts ANSWER A
What is the firm’s additional profit contribution from sales under the proposed relaxation of credit standards? (See Table 14.5) A) $2,250 B) $6,750 C) $9,000 D) $69,000 ANSWER C
What is the cost of marginal investments in accounts receivable under the proposed plan? (See Table 14.5) A) $1,817 B) $1,867 C) $1,733 D) $1,617 ANSWER C
What is the cost of marginal bad debts under the proposed plan? (See Table 14.5) A) $383 B) $765 C) $3,315 D) $5,100 ANSWER C
What is the net result of implementing the proposed plan? (See Table 14.5) A) $3,952 B) $3,869 C) $2,084 D) -$2,084 ANSWER A
A firm is considering relaxing credit standards, which will result in annual sales increasing from $1.5 million to $1. 75 million, the cost of annual sales increasing from $1,000,000 to $1,125,000, and the average collection period increasing from 40 to 55 days. The bad debt loss is expected to increase from 1 percent of sales […]
