Exam 22: Credit Management and Collection

Since defaults can be costly, it is cost effective to undertake a full credit analysis of all customers.

Determine the annual effective rate of a customer that does not take advantage of credit terms of 3/15, n/30.

When sales are made without the accompaniment of a formal debt contract, the sales are said to be on:

What effective interest rate is charged to a purchaser receiving terms of 5/10, net 90 if the purchaser avoids the discount and pays in 90 days?

Which of the following would be least expected to change as a result of a higher average age of receivables?

A firm offered 3/10, net 30 as terms of trade credit on a $1,000 invoice dated January 1.How much must the purchaser offer to pay in full on January 4th?

What is the effective annual rate of trade credit if the trade credit terms are 1/10, net 30?

An aging schedule illustrates the relationship between:

List three factors that affect a company's desired minimum cash balance.

Credit analysis is a procedure used to determine the implied cost of trade credit.

Which of the following is the least expensive source of credit information?

Higher Z scores from a multiple discriminate analysis indicate a:

Ignoring the time value of money, how much does a firm lose on a $2,000 sale that has a 30% profit margin if the 20% probability of default occurs?

How do firms assess the probability that a customer will pay?

Suppose Chan Inc.sells goods on terms 2/10 net 20.On January 1 you would buy goods from Chan with invoice value of $40,000.How much would you need to pay if you took the cash discount? What is the latest date on which the cash discount is available? By what date should you pay for your purchase if you decide not to take the cash discount?

A purchaser was offered terms of trade credit of 2/10, net 30, with an invoice date of January 1.Which one of the following acts threatens creditworthiness?

Before spilling coffee on an invoice and obliterating the final due date, you calculate the implied interest cost of trade credit at 24.89% and remember there is a 3% cash discount if paid within 10 days.When is the due date?

Under the terms of a sight draft, the buyer's bank:

According to credit experts, a full credit analysis should be conducted:

Assuming that a credit decision has been analyzed and credit refused due to a negative expected profit, which of the following changes, if of sufficient magnitude, might change the decision to one of approval?