Business
Engineering
Math
Science
Social Science
Fundamentals of Financial Manageme...
Fundamentals of Financial Manageme...
What are the four key factors in a firm’s credit policy? How would a relaxed policy differ from a restrictive policy? Give examples of how the four factors might differ between the two policies. How would the relaxed versus the restrictive policy affect sales? Profits?
To explain: The key factors of credit policy, the difference between relaxed and restrictive policy with examples in relevance of factors of credit policy. The effect of the policy on sales and profit.
Introduction:
Credit Policy:
It refers to the policy which states interest rate and duration that are relevant to the funds raised on credit. The company needs to raise funds on credit, when available funds with company are not sufficient.
The key factors of credit policy are mentioned below:
- Credit period
- Discounts
- Credit standards
- Collection policy
Difference between relaxed policy and restrictive policy:
| Â | Relaxed policy | Restrictive policy |
| Meaning | The relaxed policy includes all contingencies and provisions (those events which may take place in future) to estimate the balance of current assets. The other name for this policy is conservative policy. | This policy is an opposite of relaxed policy because it does not includes the contingencies and provisions to estimate the balance of current assets more aggressively. The other name for this policy is aggressive policy. |
|
Credit period | The credit period is longer in such policy. | The credit period is shorter in such policy. |
| Discounts | The customers enjoy higher discounts in relaxed policy. | The customers get lowered discounts under this policy in comparison of relaxed policy. |
|
Credit standards | The credit standards relevant to relaxed policy is generally of low level. | The credit standards relevant to restrictive policy is generally of high level. |
|
Collection policy | Under this policy, collection procedure is lenient, it means the borrower can get extra time to repay the amount... |
Chapter 15 Solutions
Additional Business Solutions
Find more solutions based on key concepts
Show solutions addREQUIRED ANNUITY PAYMENTS Your father is 50 years old and will retire in 10 years. He expects to live for 25 ye...
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
What is a firms intrinsic value? Its current stock price? Is the stocks true long-run value more closely relate...
Fundamentals of Financial Management (MindTap Course List)
(Demand Under Perfect Competition) What type of demand curve does a perfectly competitive firm face? Why?
ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
In an hour, Mateo can wash 2 cars or mow 1 lawn, and Tyler can wash 3 cars or mow 1 lawn. Who has the absolute ...
Principles of Microeconomics (MindTap Course List)
Like many executives, your boss is too rushed to read long journal or business articles. However, she is eager ...
Essentials of Business Communication (MindTap Course List)
Two methods of engaging in international business may be categorized as either direct or indirect. How would yo...
Foundations of Business (MindTap Course List)
According to the theory of efficiency wages, a. firms may find it profitable to pay above-equilibrium wages. b....
Principles of Macroeconomics (MindTap Course List)
Provide an example of a business where the evolution of communication (i.e., face-to-face, phone, e-mail, etc.)...
Accounting Information Systems
Flow of accounts into financial statements The balances for the accounts that follow appear in the Adjusted Tri...
Financial & Managerial Accounting
Exercise 4-40 Internal Control Terminology Required: A list of terms and a list of definitions and examples are...
Cornerstones of Financial Accounting
The accompanying comparative boxplot of gasoline vapor coefficients for vehicles in Detroit appeared in the art...
Probability and Statistics for Engineering and the Sciences
Under what conditions is the production possibilities frontier linear rather than bowed out?
Principles of Economics (MindTap Course List)
Adjusting entries for accrued salaries Paradise Realty Co. pays weekly salaries of 25,500 on Friday for a five-...
Corporate Financial Accounting
Refer to Table 1.6. a. What is the average cost for the tablets? b. Compare the average cost of tablets with a ...
STATISTICS F/BUSINESS+ECONOMICS-TEXT
A civil war abroad causes foreign investors to seek a safe haven for their funds in the United States, leading ...
Brief Principles of Macroeconomics (MindTap Course List)
Life Force Fitness, Inc., assembles and sells treadmills. Activity-based product information for each treadmill...
Financial And Managerial Accounting
The toy industry is highly competitive and can be as cutthroat as any pirate adventure. Yo-ho-ho! Snooping, cor...
Management, Loose-Leaf Version
Identify each of the following reconciling items as: (a) an addition to the cash balance according to the bank ...
Financial Accounting
You were planning to spend Saturday working at your part-time job, but a friend asks you to go skiing. What is ...
Essentials of Economics (MindTap Course List)
ADJUSTMENTS AND WORK SHEET SHOWING NET INCOME Louie Long started a business called Louies Lawn Service. The tri...
College Accounting, Chapters 1-27
Differentiate the six categories of marketing.
Contemporary Marketing
Payroll and Payroll Taxes Bailey Dry Cleaners has six employees who were paid the following wages during 2019: ...
Intermediate Accounting: Reporting And Analysis
Explain how payroll fraud can be prevented.
College Accounting (Book Only): A Career Approach
Details of notes receivable and related entries Flush Mate Co. wholesales bathroom fixtures. During the current...
Financial & Managerial Accounting
Describe several reasons for studying marketing
MKTG 12:STUDENT ED.-TEXT
Responsibility for the labor rate variance typically is assigned to a. production. b. labor markets. c. personn...
Managerial Accounting: The Cornerstone of Business Decision-Making
What does stewardship mean, and what is its role in an information system?
Accounting Information Systems
Beginning inventory, purchases, and sales for Item ProX2 are as follows: Assuming a perpetual inventory system ...
Financial Accounting
PRESENT VALUE FOR VARIOUS DISCOUNTING PERIODS Find the present value of 500 due in the future under each of the...
Fundamentals of Financial Management (MindTap Course List)
Direct materials, direct labor, and factory overhead cost variance analysis Road Gripper Tire Co. manufactures ...
Accounting (Text Only)
The U.S. Department of Energy provides fuel economy information for a variety of motor vehicles. A sample of 10...
Statistics for Business & Economics, Revised (MindTap Course List)
Identify whether each of the transactions takes place in the factor market or the product market. a. Billy buys...
Exploring Economics
Based in Boston, Massachusetts, Feeley Driscoll is a full-service consulting and forensic accounting firm. Its...
College Accounting (Book Only): A Career Approach
A company cannot implement a flexible manufacturing system (FMS) without making a heavy investment in computer ...
Pkg Acc Infor Systems MS VISIO CD
When two or more individuals engage in an enterprise as co-owners, the organization is known as a proprietorshi...
College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
Why dont banks hold 100-percent reserves? How is the amount of reserves banks hold related to the amount of mon...
Principles of Macroeconomics (MindTap Course List)
Audio-2-Go, Inc., manufactures MP3 players. Models A-1, A-2, and A-3 are small and light. They are attached to ...
Cornerstones of Cost Management (Cornerstones Series)
Use (a) the percentage method and (b) the wage-bracket method to compute the federal income taxes to withhold f...
PAYROLL ACCT.,2019 ED.(LL)-TEXT
Suppose there is a PPF with two goods, X and Y. Suppose the economy is located at a point on the PPF. Does this...
Macroeconomics
What are the benefits from measuring the total cost of ownership for a purchased item? Are there any potential ...
Purchasing and Supply Chain Management
In each of the figures (ad) that follow, the starting point is 1. Which part (a, b, c, or d) illustrates each o...
Economics (MindTap Course List)
VanBuren Metals is a manufacturing company that uses many large machines to work on metals. These machines requ...
Practical Management Science
Single-step income statement Summary operating data for Lorna Company during the current year ended April 30, 2...
Survey of Accounting (Accounting I)
Payroll summary The following data for Flexco Inc. relate to the payroll for the week ended December 9. Employe...
Corporate Financial Accounting
