By increasing collection expenditures, a firm can decrease bad debt losses up to a point, beyond which bad debts cannot be economically reduced. Indicate whether the statement is true or false ANSWER TRUE
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
One of the key inputs to the final credit decision is a credit analyst’s subjective judgment of a firm’s creditworthiness since it can provide a better feel of a firm’s operation than any quantitative figures. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Joe Manufacturing uses 2,400 units of a product per year on a continuous basis. The product carrying costs are $60 per year and ordering costs are $250 per order. It takes 20 days to receive a shipment after an order is placed and the firm requires a safety stock of 8 days of usage in […]
Date: September 19th, 2020
A firm’s credit selection procedures must be established on a sound economic basis that considers the costs of investigating the creditworthiness of a customer and the expected size of its credit purchases. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
One of the components of a cash conversion cycle is the average collection period. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
