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When a company decides to extend credit to consumers, it is making an investment decision in:
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- What information can best be elicited from a receivable ratio? A. company performance with current debt collection B. credit extension effect on cash sales C. likelihood of future customer bankruptcy filings D. an increase in future credit sales to current customersWhich of the following use financial statement data to make decisions? a. customers c. suppliers b. investors d. all of theseDescribe todays financial services marketplace, both depository and nondepository financial institutions.
- How do each of the items in a firm’s credit policy—defined to include the credit period, the discountand discount period, the credit standards used,and the collection policy—affect its sales, the levelof its accounts receivable, and its profitability?which of the following source of finance relates to suppliers ? a.Commercial Paper b.Bank Overdraft c.Trade credit d.Credit cardWhich of the following roles is considered a main objective of credit rating agencies? a. Granting loans to borrowers b. Lessen information asymmetry. c. Underwriting securities d. Receiving investments from capitalists. e. Taking deposits from savers
- Effective 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. A. How a company handles its credit accounts, including methods of invoicing and collecting past-due accounts, is indicated by the company’s . Consider the case of Sombra Corp.: Sombra Corp.’s CFO has decided to take a closer look at the company’s credit policy. Sombra Corp. has annual sales of $384.4 million, and it currently has an accounts receivable balance of $45.9 million. The first step in analyzing the firm’s credit policy is to determine its days sales outstanding (DSO). B. Based on this information, Sombra Corp.’s DSO is . (Note: Use 365 days as the length of a year in all calculations.) C. The average DSO for Sombra Corp.’s…Which of the following is/are primary sources of data? i. Data collected by a bank through telephone calls from the credit card customers to gain an insight on their satisfaction level. ii. Previous records of Commission received to be used to prepare forecasts for next year. iii. Data collected from Global Business review about recent market trendsEffective 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. How a company handles its credit accounts, including methods of invoicing and collecting past-due accounts, is indicated by the company’s . Consider the case of Three Waters Co.: Three Waters Co.’s CFO has decided to take a closer look at the company’s credit policy. Three Waters Co. has annual sales of $384.4 million, and it currently has an accounts receivable balance of $45.4 million. The first step in analyzing the firm’s credit policy is to determine its days sales outstanding (DSO). Based on this information, Three Waters Co.’s DSO is . (Note: Use 365 days as the length of a year in all calculations.) The average DSO for Three…
- Ratio analysis involves calculations that use the data from the financial statements to evaluate the performance of companies in different key areas. How would this information be used by a credit analyst as compared to someone is going to make an investment decision?If a bank uses credit risk score to determine who will receive a loan, the credit risk score would be considered the: A. dependent variable B. independent variable C. response variable D. classification variableHow do creditors assess risk when lending funds to a company? a. By establishing covenants in the borrowing agreement b. By monitoring the borrower’s debt-to-equity ratio c. By checking a prospective borrower’s credit rating before lending to it d. All of the above answers are correct.
