An increase in collection efforts by a firm will result in ________ in sales volume, ________ in the investment in accounts receivable, ________ in bad debt expenses, and ________ in collection expenditures. A) an increase; a decrease; an increase; a decrease B) an increase; a decrease; a decrease; an increase C) an increase; a decrease; […]
An aging schedule breaks down accounts receivable into groups on the basis of the first letter of the name of the company that owes on the account. Indicate whether the statement is true or false ANSWER FALSE
A firm’s credit terms cover ________. A) credit standards B) lines of credit C) cash discount period D) credit scoring ANSWER C
The most stringent step in the collection process is ________. A) letters B) personal visits C) collection agencies D) legal action ANSWER D
The first step in the collection of overdue accounts is ________. A) a letter B) contacting a collection agency C) legal actions D) a personal visit ANSWER A
A firm is considering relaxing credit standards which will result in an increase in annual sales from $3 million to $3. 75 million, a decrease in the cost of annual sales from $2,225,000 to $2,000,000, an increase in additional profit contribution from sales of $10,000, and an increase in the average collection period of 15 […]
Credit Scoring Policy Jia’s Jewelry uses the credit scoring technique to evaluate retail applications. The financial and credit characteristics considered and weights indicating their relative importance in the credit decision are shown above. The firm’s credit standards are to accept all applicants with credit scores of 85 or more, to extend limited credit to applicants […]
Maggie’s Gold Coins, Inc is considering shortening its credit period from 30 days to 20 days and believes, as a result of this change, its average collection period will decrease from 36 days to 30 days. Bad debt expenses are also expected to decrease from 1.2 percent to 0.8 percent of sales. The firm is […]
If the level of bad debt attributable to credit policy is relatively constant, increasing collection expenditures can be expected to reduce bad debts. Indicate whether the statement is true or false ANSWER TRUE
Which of the following is true of a credit applicant’s character? A) It reflects a credit applicant’s ability to repay his debt obligation. B) It reflects a credit applicant’s past payment history. C) It reflects the level of liquid assets available with a credit applicant. D) It reflects any unique conditions surrounding a credit applicant’s […]
