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Financial Decisions 4a. Receivables Management recognition granting Instructor: A. Ashta References: Ross, Westerfield Jordan: Ch. 17 Emery, Finnerty & Stowe: Ch. 23 1 Why hold in accounts receivables? & atomic frame 29; credence sales create accounts receivables • Accounts receivables bell shape money (interest) • So why grant sanction? • Financial intermediation – Cheaper than posit for customers, more than paying for than curses 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 thickening mails validation Firm deposits check in bank entrust attribute star sign’s account Credit forethought Cash collection Accounts receivable 3 Components of Credit polity • Terms of sale – Conditions under which a firm sells its goods and services for currency or deferred payment. • Credit summary – The process of determining the prospect that customers give or will not pay. • array Policy – Procedures followed by a firm in collecting accounts receivable.

4 Determinants of length of Credit Period – Product market aspiration – More competition performer more doctrine offered – The size/ countervailing power of emptor – Customer type – Wholesaler, retailer or final consumer – Credit risk – Per ishability and corroboratory value – ! Consumer demand – New customers get hold of longer opinion period – Cost, gainfulness and standardization 5  be of Granting Credit Cost in dollars Optimal amount of credit Total costs Carrying costs Carrying costs are the coin flows that must be incurred when credit is granted. They are positively link to to the amount of credit extended. Opportunity costs Amount of credit extended Opportunity costs are the lost...If you want to soda pop off a full essay, order it on our website: BestEssayCheap.com

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