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
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
Which of the following is true of credit scoring? A) It audits the amount of assets the applicant has available for use in securing the credit. B) It specifies the terms of sale for customers who have been extended credit by a firm. C) It is an ongoing review of a firm’s accounts receivable to […]
Date: September 19th, 2020
________ are established to evaluate a customer’s creditworthiness and to determine the minimum requirements for extending credit to a customer. A) Lines of credit B) Credit limits C) Collection agencies D) Credit standards ANSWER D
Date: September 19th, 2020
