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
Date: September 19th, 2020
If a firm increases its cash discount period, the firm’s investment in accounts receivable due to non-discount takers now paying earlier is expected to decrease. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
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 […]
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 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
The cost of marginal investment in accounts receivable can be calculated by finding the difference between the average investment in accounts receivable before and after the introduction of the changes in credit standards. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
The cost of marginal bad debts is found by multiplying a firm’s opportunity cost by the difference between the level of bad debts before and after the relaxation of credit standards. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
The key dimension of credit selection which analyzes an applicant’s record of meeting past obligations is ________. A) collateral B) capacity C) character D) capital ANSWER C
Date: September 19th, 2020
________ is a procedure resulting in a number reflecting an applicant’s credit strength, derived as a weighted average of the scores obtained on a variety of key financial and credit characteristics. A) Credit scoring B) Aging of receivables C) CAPM D) The economic order quantity model ANSWER A
Date: September 19th, 2020
The key dimension of credit selection which analyzes an applicant’s ability to repay the requested credit focused on cash flows available is ________. A) collateral B) capital C) conditions D) capacity ANSWER D
Date: September 19th, 2020
