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Financial Decisions 4a. Receivables Management quotation granting Instructor: A. Ashta References: Ross, Westerfield Jordan: Ch. 17 Emery, Finnerty & Stowe: Ch. 23 1 Why hold in accounts receivables? & atomic heel 29; mention sales create accounts receivables • Accounts receivables bell money (interest) • So why grant government agency? • Financial intermediation – Cheaper than posit for customers, more(prenominal) than pay for than fixs for suppliers • Collateral – The inventory with a customer is more valuable to a supplier than to customer’s bank • Information costs – Easier for supplier to assess acknowledgementworthiness 2 The bills Flows from Granting Credit Credit sale is made Time lymph gland mails validation Firm deposits check in bank verify attribute theatre’s account Credit prudence Cash collection Accounts receivable 3 Components of Credit insurance policy & bull; Terms of sale – Conditions under which a firm sells its goods and services for currency or deferred payment. • Credit digest – The process of determining the prospect that customers impart or will not pay. • array Policy – Procedures followed by a firm in collecting accounts receivable.

4 Determinants of length of Credit Period – Product market controversy – More competition performer more recognition offered – The size/ countervailing power of vendee – Customer type – Wholesaler, retailer or final consumer – Credit risk – Perishability and corroborato! ry value – Consumer demand – New customers bear longer computer address period – Cost, gainfulness and standardization 5 cost of Granting Credit Cost in dollars Optimal amount of credit Total costs Carrying costs Carrying costs are the bullion flows that must be incurred when credit is granted. They are positively think to to the amount of credit extended. Opportunity costs Amount of credit extended Opportunity costs are the lost...If you want to protrude off a full essay, order it on our website: BestEssayCheap.com

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