FIN4320_Lecture_7_Credit_and_Collections(33p)

FIN4320_Lecture_7_Credit_and_Collections(33p) - Credit and...

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    Credit and  Credit and  Collections Collections Lecture 7 Lecture 7
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    Organization of Credit and A/R Organization of Credit and A/R Credit Manager Will Have Responsibility  Over Credit and A/R  Credit Policies And Collections Will Impact  Cash Flows Credit Managers And Cash Managers  Must Interact
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    Importance Of Credit Importance Of Credit Sales Efforts Credit And Price Are Interchangeable Credit Impacts The Whole Firm Account Receivables Are A Large  Percentage Of Total Assets Important in Both Consumer and  Corporate Transactions
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    Why Firms Extend Credit Why Firms Extend Credit Inspection Period Information Inefficiencies Flexibility And Customer Convenience Competition Promotion  Profit
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    Objective of Credit Terms Objective of Credit Terms Maximize Profitability of Sales, Subject to  Certain Constraints. Constraints Industry Convention Difficulty Of Change Contractual Obligations  Legal Constraints Working Capital Constraints
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    Working Capital Constraints Working Capital Constraints Example: Bank May Require Minimum Working Capital  Ratios Current Ratio Of 2.5 Or Better CA = $250,000 And CL = $100,000 Current Ratio = 2.5 Both AR And AP Increase By $50,000, New Current Ratio Is $300,000/$150,000 = 2.0 
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    Who Does The Financing? Who Does The Financing? Direct Financing Indirect Financing Third-Party Tie-ins Private Label Financing Factoring
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    Financial Implications Of A/R  Financial Implications Of A/R  A/R Is A Use Of Funds  A/R May Cause Liquidity Problems  A/R May Be A Source Of Liquidity
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  Benefits Of Establishing A 
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This note was uploaded on 04/02/2009 for the course DEPARTMENT FIN 4320 taught by Professor Sherwoodbishop during the Spring '08 term at Southwestern.

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FIN4320_Lecture_7_Credit_and_Collections(33p) - Credit and...

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