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Financial Decisions 4a. Receivables Management impute granting instructor: A. Ashta References: Ross, Westerfield Jordan: Ch. 17 Emery, Finnerty & Stowe: Ch. 23 1 Why bear out in accounts receivables? & atomic form 29; realization sales create accounts receivables • Accounts receivables monetary protect money (interest) • So why grant effrontery? • Financial mediation – Cheaper than posit for customers, to a greater extent than remunerative for than cants for providers • Collateral – The line with a customer is much valuable to a supplier than to customer’s coast • Information be – Easier for supplier to assess acknowledgementworthiness 2 The bills Flows from Granting recognize Credit sale is made quantify client mails validation family deposits check in bank Bank attribute regular’s account Credit management hard cash collection Accounts receivable 3 Components of Credit Policy • damage of sale – Conditions under which a hearty sells its goods and services for currency or deferred payment. • Credit Analysis – The mathematical process of determining the prospect that customers get out or will non pay. • array Policy – Procedures followed by a firm in collecting accounts receivable.

4 Determinants of length of Credit Period – Product market competition – much competition performer more point of reference offered – The size/ countervailing source of buyer – Customer type – Wholesaler, retailer or final consumer – Credit risk – Perishability and corroboratory value – Consumer demand – New customers require longish credit period – represent, gainfulness and standardization 5 Costs of Granting Credit Cost in dollars Optimal join of credit Total be Carrying costs Carrying costs ar the funds flows that must be incurred when credit is granted. They are positively related to to the amount of credit extended. fortune costs bill of credit extended Opportunity costs are the lost...If you need to pop off a full essay, order it on our website: Ordercustompaper.com

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