Chapter 10 Accounts receivable and Inventory Management 10-1
10-1 Chapter 10 Accounts Receivable and Inventory Management
Accounts Receivable and Inventory Management Credit and collection Policies Analyzing the Credit pplicant Inventory Management and Control 10-2
10-2 Accounts Receivable and Inventory Management Credit and Collection Policies Analyzing the Credit Applicant Inventory Management and Control
Credit and Collection Policies of the firm Quality of Length of Trade Account Credit Period (1)Average Collection Period (2)Bad-debt Losses Firm Possible cash Collection Discount Program 10-3
10-3 Credit and Collection Policies of the Firm (1) Average Collection Period (2) Bad-debt Losses Quality of Trade Account Length of Credit Period Possible Cash Discount Firm Collection Program
Credit Standards Credit Standards -- The minimum quality of credit worthiness of a credit applicant that is acceptable to the firm Why lower the firm's credit standards? The financial manager should continually lower the firm's credit standards as long as profitability from the change exceeds the extra costs generated by the additional receivables 10-4
10-4 Credit Standards The financial manager should continually lower the firm’s credit standards as long as profitability from the change exceeds the extra costs generated by the additional receivables. Credit Standards -- The minimum quality of credit worthiness of a credit applicant that is acceptable to the firm. Why lower the firm’s credit standards?
Credit Standards Costs arising from relaxing credit standards A larger credit department Additional clerical work Servicing additional accounts Bad-debt losses Opportunity costs 10-5
10-5 Credit Standards A larger credit department Additional clerical work Servicing additional accounts Bad-debt losses Opportunity costs Costs arising from relaxing credit standards