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Managerial Finance Study Set 2
Quiz 14: Working Capital and Current Assets Management
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Question 181
Multiple Choice
________ are established to evaluate a customer's creditworthiness and to determine the minimum requirements for extending credit to a customer.
Question 182
True/False
A relaxation of credit standards is expected to affect profits positively due to lower carrying costs,whereas tightening credit standards would affect profits negatively as a result of higher carrying costs.
Question 183
True/False
By increasing collection expenditures,a firm can decrease bad debt losses up to a point,beyond which bad debts cannot be economically reduced.
Question 184
True/False
The increase in bad debts associated with tightening credit standards raises bad debt expenses and has a negative impact on profits.
Question 185
Multiple Choice
________ 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.
Question 186
True/False
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.
Question 187
True/False
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.