Chapter 29

Chapter 29 - Chapter 29 Credit Management When a firm sell...

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Chapter 29 – Credit Management When a firm sell good it can be paid immediately in cash or wait for a time to be paid (extend credit ) Granting credit is investing in a customer, an investment tied up to the sale of a product or service Components of the credit policy o Terms of the sale – firm must decide on certain conditions when selling its goods for credit o Credit analysis – a firm must distinguish between customers that will pay and those not likely to pay o Collection policy – firms must establish a policy for collecting the cash when it becomes due 29.1 Terms of the Sale 2/10, net 30 → customer has 30 days from the invoice date within which to pay o a cash discount of 2 percent from the stated price is to be given if payment is made within 10 days Credit period 1. The probability that the customer will not pay – high risk businesses have more restrictive credit terms 2. The size of the account – less for small accounts since they are less important
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This note was uploaded on 11/16/2009 for the course F 3033 taught by Professor Hh during the Spring '09 term at Maastricht.

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Chapter 29 - Chapter 29 Credit Management When a firm sell...

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