PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 30, Problem 20PS
a)
Summary Introduction
To discuss: Whether exporters needs greater certainty of payment that arrange for customers to sign bill of lading for a sight draft.
b)
Summary Introduction
To discuss: Whether monitor the credit manager’s performance by looking at the
c)
Summary Introduction
To discuss: Whether customer refuses to pay despite reminders, then company turns the debt to an attorney or factor.
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Students have asked these similar questions
What does an increasing collection period for
accounts receivable suggest about a firm's credit
policy?
Select one:
O A. The collection period has no relationship to a
firm's credit policy
O B. The firm is probably losing qualified
customers.
C. The credit policy may be too lenient.
O D. The credit policy is too restrictive.
Which of the following is a valid alternative action for an organization to take to minimize credit losses? Multiple Choice Force
collections with expensive penalties for late payments.
Review accounts receivables on a regular basis.
None of the other alternatives are correct
Never sell on credit.
Implement a system of formal naming and shaming for customers making late payments.
What would a credit manager do if a sales order received caused a customer to exceed its credit limit?
Chapter 30 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 30 - Prob. 1PSCh. 30 - Components of working capital True or false? a....Ch. 30 - Inventory True or false? a. Just-in-time inventory...Ch. 30 - Inventory What are the trade-offs involved in the...Ch. 30 - Prob. 5PSCh. 30 - Prob. 6PSCh. 30 - Prob. 7PSCh. 30 - Prob. 8PSCh. 30 - Prob. 9PSCh. 30 - Credit terms Phoenix Lambert currently sells its...
Ch. 30 - Prob. 11PSCh. 30 - Prob. 12PSCh. 30 - Prob. 13PSCh. 30 - Prob. 14PSCh. 30 - Prob. 15PSCh. 30 - Credit policy How should your willingness to grant...Ch. 30 - Prob. 17PSCh. 30 - Prob. 18PSCh. 30 - Prob. 19PSCh. 30 - Prob. 20PSCh. 30 - Cash management Complete the passage that follows...Ch. 30 - Prob. 22PSCh. 30 - Prob. 23PSCh. 30 - Prob. 24PSCh. 30 - Prob. 25PSCh. 30 - Prob. 26PSCh. 30 - Prob. 27PSCh. 30 - Prob. 28PSCh. 30 - Prob. 29PSCh. 30 - Prob. 30PSCh. 30 - Prob. 31PSCh. 30 - Prob. 32PSCh. 30 - Prob. 34PSCh. 30 - Prob. 35PSCh. 30 - Prob. 36PSCh. 30 - After-tax yields Suppose you are a wealthy...Ch. 30 - Prob. 38PSCh. 30 - Prob. 39PS
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Question 1: Why do we need to estimate doubtful accounts?Question 2: Which is better to have? Accounts receivable or notes receivable? And why?Question 3: What happens if companies use the direct write-off method in accounting for bad debts? What will be the effect in the financial statements? Question 4: What is the relationship of the promissory note between the maker and the payee?arrow_forwardYour company provides credit to customers. Someof these customers default on their loans, with verynegative implications for you. Describe how you coulduse discriminant analysis to learn what distinguishesthe customers who default on their loans from thosewho pay back their loans. How might you use such amodel?arrow_forwarda. At the stage of recording a credit sale transaction, please state the potential misstatements 3) Accounts receivable collection period can occur! Give examples of control risk corsiderations in credit sales transactions! 4) Uncollectible accounts receivable expense against net credit sales b. According to information taken from the accounting records of the manufacturing company PT. 5) Uncollectible Accounts Receivable Fee against the write-off of accounts receivable Hozutama b. In your opinion what are the implications of the ratio results for auditors in the audit strategy is as follows : done in year 5 Sth Year 4th Year 3rd Year 2nd Year 1st Year Unaudited Unaudited Unaudited Unaudited Unaudited Business Opportunities (Gross) Allowance for (14,150) IDR 535,000 IDR 295,000 IDR 265,000 IDR207,500 IDR175,000 (6,400) (5,275) (5,900) (5,400) Losses on Accounts Total Assets 2,200,000 2,700,000 1,800,000 2,050,000 1,500,000 1,750,000 1,200,000 1,400,000 1,000,000 1,200,000 Total Sales…arrow_forward
- A Letter of Credit (LC) is a document that guarantees the buyer's payment to the sellers. It is issued by a bank and ensures timely and full payment to the seller. If the buyer is unable to make such a payment, the bank covers the full or the remaining amount on behalf of the buyer. Why would the bank pay the remaining amount on behalf of the buyer, and what would be the risk exposed to the bank? Please explain thoroughly.arrow_forwardWhen a large account receivable balance is due from one client it is logical to use the direct write-off method to adjust the bad debt expense and accounts receivable balance. Under different circumstances, another method is used called the allowance method. Discuss the best reason(s) for using the allowance method and give some examples of companies that are likely to use that method. Also explain why it would ever be appropriate to use the direct write-off method, especially since it is not GAAP.arrow_forwardWhen a large account receivable balance is due from one client it is logical to use the direct write-off method to adjust the bad debt expense and accounts receivable balance. Under different circumstances, another method is used called the allowance method. Discuss the best reason(s) for using the allowance method and give some examples of companies that are likely to use that method. Also explain why it would ever be appropriate to use the direct write-off method, especially since it is not GAAarrow_forward
- Which of the following is not an example of control procedures over accounts receivable? A.Monitoring the total amount of "credit card sales" and investigating reasons for increases in the amount B.Sending monthly statements to customers who purchased on credit C.Denying additional credit to customers with very overdue accounts D.Requiring customers complete a credit application before granting credit to the customerarrow_forward1.Is it fair for creditors to continue reporting late payments after the payments have been made? What do you think about experts’ suggestion that people with credit blemishes write a sincere “goodwill” letter to creditors asking for compassion and requesting that the records of their late payments be erased? 2. Is it true that the “squeaky wheel gets the most grease,” meaning that the customer complaining the loudest and most aggressively will get noticed and receive the greatest concessions?arrow_forwardEffective credit management involves establishing credit standards for extending credit to customers, determining the company’s credit terms, and setting up procedures for invoicing and collecting past-due accounts. The following statement refers to a credit management policy. Select the best term to complete the sentence. The minimum financial strength a customer must have to be granted credit is indicated by the company’s . Consider the case of Universal Exports Inc.: Universal Exports Inc. has a very attractive credit policy, and none of its customers pays in cash when the firm makes a sale. Universal Exports Inc. sells to its customers on credit terms of 1/10, net 30. If a customer bought $150,000 worth of goods and paid the firm cash eight days after the sale, how much cash would Universal Exports Inc. get from the customer? $157,500 $148,500 $120,000 $127,500 If the customer paid off the account after 15 days, Universal…arrow_forward
- When will a credit check approval most likely require specific authorization by the credit department? a. when verifying that the current transaction does not exceed the customer’s credit limit b. when verifying that the current transaction is with a valid customer c. when a valid customer places a materially large order d. when a valid customer returns goodsarrow_forwardWhich of the following statements is correct? Select one: a. Account receivable turnover is equal to net credit sales divided by average net accounts receivable. b. Buying aged receivables from businesses and then collects the payments directly from the customers is called Allowance for uncollectible accounts. c. Auto generated document numbers is a fraud preventive method which is more efficient than physical controls. d. If the same people are responsible for a series of related accounting activities is called Segregation of Duties.arrow_forwardIn most lending organisations, credit losses occur due to lack of credit risk monitoring. You’rerequired to identify a lending organisation of your choice (bank or retailer) and outline its periodicalcredit risk review process.arrow_forward
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