A technique that provides an analyst with the information concerning the proportion of each type of account that has been outstanding for a specified period of time is called ________. A) credit analysis B) credit scoring C) aging of receivables D) the economic order quantity model ANSWER C
Date: September 19th, 2020
Which of the following is true of cash discount? A) It increases bad debts because after availing discounts all customers may not pay. B) It decreases the investment in accounts receivable and increases the per unit profit. C) It helps to speed up collections without putting pressure on customers. D) It reduces sales because the […]
Date: September 19th, 2020
When a firm initiates or increases a cash discount, sales are expected to ________, the investment in accounts receivable is expected to ________, the bad debt expense is expected to ________, and the profit per unit is expected to ________. A) decrease; increase; increase; increase B) decrease; decrease; increase; increase C) increase; increase; decrease; decrease […]
Date: September 19th, 2020
When a firm decreases or cancels a cash discount, sales are expected to ________, the investment in accounts receivable is expected to ________, the bad debt expense is expected to ________, and the profit per unit is expected to ________. A) decrease; increase; increase; increase B) decrease; decrease; increase; increase C) increase; increase; decrease; decrease […]
Date: September 19th, 2020
If the cash discount period is increased, a firm’s investment in accounts receivable is expected to ________. A) increase because existing customers attracted by the new policy will buy more products B) decrease because of non–discount takers paying earlier to avail the cash discount C) decrease because discount takers will pay more in order to […]
Date: September 19th, 2020
As credit standards are tightened, sales are expected to ________ and the investment in accounts receivable is expected to ________. A) increase; increase B) increase; decrease C) decrease; decrease D) decrease; increase ANSWER C
Date: September 19th, 2020
If a firm’s credit period is decreased, the sales volume, the investment in accounts receivable, and the bad debt expenses can be expected to increase. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Which of the following major variables should be considered when evaluating proposed changes in credit standards? A) level of inventories B) accounts payable C) level of liquid assets D) bad debt expenses ANSWER D
Date: September 19th, 2020
When a firm initiates or increases a cash discount, the net effect on the accounts receivable investment is difficult to determine because the nondiscount takers paying earlier will reduce the accounts receivable investment, while the new customer accounts will increase this investment. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
An applicant’s capacity to repay its requested credit can be found by ________. A) analyzing financial statements B) checking bank account balances C) analyzing tax payment history D) checking the covenants ANSWER A
Date: September 19th, 2020
