TIF_ch23 - Test Bank Chapter 23: Accounts Receivable and...

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Test Bank Chapter 23: Accounts Receivable and Inventory Management EFS I. True or False (Definitions and Concepts) F 1. Credit sales create immediate cash. (FALSE: Should be accounts receivable instead of immediate cash.) F 2. Between firms, trade credit occurs when one firm buys goods or services from another with simultaneous payment. (FALSE: Should be without simultaneous instead of with simultaneous.) T 3. Consumer credit, or retail credit, is created when a firm sells goods or services to a consumer without simultaneous payment. T 4. Trade credit is effectively a loan from one firm to another. F 5. Suppliers do not know how to handle the goods as collateral better than other lenders such as banks. (FALSE: Should be know how instead of do not know how.) F 6. A supplier generally has poorer information than the customer about the quality of its products. (FALSE: Should be better instead of poorer.) T 7. Credit can provide a cheaply enforced product quality guarantee. T 8. By granting credit to the ultimate buyer, the payments mechanism bypasses all of the agents in the distribution process, requiring only one payment from the ultimate buyer to the original seller. F 9. Credit is not an important part of marketing. (FALSE: Should be can be an important instead of is not an important.) T 10. Convenience and safety are important for both business and retail customers, but psychology is also important, especially at the retail level. T 11. Credit-policy affects a firm’s revenues and costs. F 12. A more liberal credit policy should decrease the cost of goods sold and increase the gross profit, bad debt expenses, the cost of carrying additional receivables, and administrative costs. (FALSE: Should be increase the cost of goods sold instead of decrease the cost of goods sold.) T 13. Depending on the industry, credit policy can vary from being crucial to being irrelevant. T 14. Credit terms are the contract between the supplier and credit customer specifying how the credit will be repaid. T 15. The invoice is a written statement about goods that were ordered, along with their prices and the payment dates.
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F 16. When a firm is using invoice billing, the invoice that accompanies shipment is an additional bill to be paid. (FALSE: Should be a separate bill instead of an additional bill.) T 17. A firm can protect itself from uncertainty by maintaining safety stocks–that is, a buffer inventory. F 18. CIA stands for cash in addition and CBD stands for cash before delivery. (FALSE: Should be cash in advance instead of cash in addition.) T 19. Unlike COD, cash terms allow the customer to mail the payment. T 20. Although seasonal dating does give buyers a longer time to pay, sellers benefit by encouraging buyers to make earlier purchase decisions. II. Multiple Choice (Definitions and Concepts)
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This note was uploaded on 01/21/2011 for the course ACC 452 taught by Professor Mr.cula during the Spring '10 term at Abraham Baldwin Agricultural College.

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TIF_ch23 - Test Bank Chapter 23: Accounts Receivable and...

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