Chapter 20 Finance

The three components of credit policy are:

• collection policy, credit analysis, and interest rate determination.

• collection policy, credit analysis, and terms of the sale.

• credit analysis, repayment analysis, and terms of the sale.

• collection policy, interest rate determination, and repayment analysis.

One effect of granting credit to customers is that total revenues may increase if both the quantity sold and the price per unit increase when credit is granted.

• True

• False

NPV of switching = ...

• -[PQ + v(Q′ - Q)] + [(P - v)(Q′ - Q)]/R

• [PQ + v(Q′ - Q)] + [(P - v)(Q′ - Q)]/R

• [PQ + v(Q′ - Q)] + [(P - v)(Q′ - Q)]

• -[PQ + v(Q′ - Q)] - [(P - v)(Q′ - Q)]/R

Accounts receivable= .....

• (Beginning receivables + Ending receivables)/2
  

• Average daily sales × ACP

• Net credit sale/Average account receivables

In evaluating credit policy, how many basic factors to consider?

• 2

• 3

• 4

• 5

When credit policy is at the optimal point, the:

• Total costs of granting credit will be maximized

• Carrying costs of credit will be equal to zero

• Opportunity cost of credit will be equal to zero

• Carrying costs will equal the opportunity costs

What is the four-step sequence of procedures to deal with customers whose payments are overdue?

• Delinquency letter; telephone call; collection agency; legal action

• Delinquency letter; collection agency; telephone call; legal action

• Telephone call; delinquency letter; collection agency; legal action

• Delinquency letter; telephone call; legal action; collection agency