Which of the following is a major external source of credit information? A) suppliers B) bank checking C) customers D) distributors ANSWER B
Date: September 19th, 2020
If a firm relaxes its credit standards, the volume of accounts receivable increases and so does the firm’s carrying cost. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Which of the following is true of credit scoring of suppliers? A) It is frequently used in business because the scoring information is easy to obtain. B) It is frequently used in business because scoring standards are too flexible. C) It is frequently not used in business because most business transactions involve mercantile credit which […]
Date: September 19th, 2020
A relaxation of credit standards is expected to affect profits positively due to lower carrying costs, whereas tightening credit standards would affect profits negatively as a result of higher carrying costs. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
The increase in bad debts associated with tightening credit standards raises bad debt expenses and has a negative impact on profits. Indicate whether the statement is true or false ANSWER FALSE
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
