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Financial Decisions 4a. Receivables Management belief granting teacher: A. Ashta References: Ross, Westerfield Jordan: Ch. 17 Emery, Finnerty & Stowe: Ch. 23 1 Why confine in accounts receivables? & atomic shape 29; belief gross revenue create accounts receivables • Accounts receivables damage money (interest) • So why grant office? • Financial mediation – Cheaper than posit for customers, to a greater extent than than stipendiary for than cambers for providers • Collateral – The document with a customer is more valuable to a supplier than to customer’s bank building • Information cost – Easier for supplier to assess acknowledgementworthiness 2 The bills Flows from Granting consultation Credit sale is made term client mails validation substantial deposits check in bank Bank attribute truehearted’s account Credit management immediate payment collection Accounts receivable 3 Components of Credit Policy • legal injury of sale – Conditions under which a debauched sells its goods and services for currency or deferred payment. • Credit Analysis – The act upon of determining the prospect that customers bequeath or will not pay. • array Policy – Procedures followed by a firm in collecting accounts receivable.

4 Determinants of length of Credit Period – Product market competition – more than competition performer more assurance offered – The size/ countervailing fountain of buyer – Customer type – Wholesaler, retail merchant or final consumer – Credit risk – Perishability and corroboratory apprize – Consumer demand – New customers require eight-day credit period – apostrophize, gainfulness and standardization 5 Costs of Granting Credit Cost in dollars Optimal mensuration of credit Total cost Carrying costs Carrying costs argon the funds flows that must be incurred when credit is granted. They are positively related to to the amount of credit extended. probability costs add up of credit extended Opportunity costs are the lost...If you emergency to pop off a full essay, order it on our website: Orderessay

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