Question 1

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

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Question 2

Discuss the premise behind the validity of a numerical credit scoring system.

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Question 3

Suppose CumChan Inc.sells goods on terms 2/10 net 20.On January 1 you would buy goods from CumChan 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?

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Question 4

Consider a firm with the following financial ratios:
EBIT/total assets = .12
Sales/total assets = 1.4
Market equity/book debt = .9
Retained earnings/total assets = .4
Working capital/total assets = .12
What is the firm Z scorer?

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Question 5

What is the break-even probability of collection if the present value of the revenues from the sale is $2,200 rather than $2,400? Why does the break-even probability increase? Use your answer to decide whether firms that sell high-profit margin or low-margin goods should be more willing to issue credit.

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Question 6

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

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Question 7

When does it make sense to ask customers for formal IOUs?

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Question 8

What information can the financial manager obtain from an aging schedule of accounts receivable?

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Question 9

How do firms decide whether it makes sense to grant credit to a customer?

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Question 10

How do firms decide whether to grant credit to a customer?

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Question 11

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

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Question 12

What are the usual steps in credit management?

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Quiz 22: Credit Management and Collection

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

Discuss the premise behind the validity of a numerical credit scoring system.

Consider a firm with the following financial ratios: EBIT/total assets = .12 Sales/total assets = 1.4 Market equity/book debt = .9 Retained earnings/total assets = .4 Working capital/total assets = .12 What is the firm Z scorer?

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

When does it make sense to ask customers for formal IOUs?

What information can the financial manager obtain from an aging schedule of accounts receivable?

How do firms decide whether it makes sense to grant credit to a customer?

How do firms decide whether to grant credit to a customer?

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

What are the usual steps in credit management?