As credit standards are relaxed, 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 A
Date: September 19th, 2020
If a firm increases its cash discount period the firm’s investment in accounts receivable, due to discount takers still getting cash discounts but paying later, is expected to increase. Indicate whether the statement is true or false ANSWER TRUE
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
A firm is analyzing a relaxation of credit standards that is expected to increase sales 10 percent. The firm is currently selling 400 units at an average sale price per unit of $575, and the variable cost per unit is $400 at the current sales volume. The average cost per unit is $425. What is […]
Date: September 19th, 2020
When a firm’s credit standards is relaxed ________. A) its sales is expected to decrease with corresponding increase in costs B) its costs is expected to decrease with corresponding decrease in sales C) its costs is expected to increase faster than sales if the standards are not relaxed D) its profit contribution from sales will […]
Date: September 19th, 2020
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
Date: September 19th, 2020
