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 average investment of a firm in accounts receivable is equal to the firm’s total variable cost of annual sales divided by its average collection period. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
In analyzing an applicant’s creditworthiness, a credit manager typically gives primary attention to two of the five C’s of credit—collateral and condition—since they represent the most basic requirements for extending credit to an applicant. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
If a gold producer wishes to employ a non-contingent hedge, it should use a(n) (i) contract, while if it wishes to employ a contingent hedge (i.e., to hedge only down-side risk), it should use a(n) (ii) contract. (i) (ii) a. forward put option b. put option forward c. forward call option d. call option forward […]
Date: September 19th, 2020
The objective for managing accounts receivable is to avoid credit sales as much as possible. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Firms that face a __ tax rate structure have an incentive to hedge, because it can reduce the firm’s expected tax liability. a. flat b. regressive (or concave) c. decelerating d. progressive (or convex) ANSWER D
Date: September 19th, 2020
