chap021 - Chapter 021 Credit and Inventory Management...

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Chapter 021 Credit and Inventory Management Multiple Choice Questions 1. The conditions under which a firm sells its goods and services for cash or credit are called the: A . terms of sale. b. credit analysis. c. collection policy. d. payables policy. e. collection float. SECTION: 21.1 TOPIC: TERMS OF SALE TYPE: DEFINITIONS 2. The process of determining the likelihood that customers will not pay is called: a. the terms of sale. B . credit analysis. c. the collection policy. d. the payables policy. e. disbursement analysis. SECTION: 21.1 TOPIC: CREDIT ANALYSIS TYPE: DEFINITIONS 3. The procedures a firm follows in the pursuit of customer payments are referred to as the firm's _____ policy. a. sales b. credit C . collection d. payables e. disbursements SECTION: 21.1 TOPIC: COLLECTION POLICY TYPE: DEFINITIONS 21-1
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Chapter 021 Credit and Inventory Management 4. The length of time for which credit is granted to a firm's customers is called the: a. payables period. b. operating cycle. c. transactions period. D . credit period. e. disbursement period. SECTION: 21.2 TOPIC: CREDIT PERIOD TYPE: DEFINITIONS 5. The bill for goods or services provided by the seller to the purchaser is called a(n): a. ledger statement. b. warranty. c. indenture. d. indemnity statement. E . invoice. SECTION: 21.2 TOPIC: INVOICE TYPE: DEFINITIONS 6. A discount given to buyers as an inducement for prompt payment is called a(n) _____ discount. A . cash b. purchase c. collection d. market e. receivables SECTION: 21.2 TOPIC: CASH DISCOUNT TYPE: DEFINITIONS 21-2
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Chapter 021 Credit and Inventory Management 7. The basic evidence of indebtedness is called the: a. account document. b. sales draft. C . credit instrument. d. commercial paper. e. letter of debt. SECTION: 21.2 TOPIC: CREDIT INSTRUMENT TYPE: DEFINITIONS 8. A graphical representation of the sum of the carrying costs and the opportunity costs of a chosen credit policy is called the: a. opportunity cost curve. b. credit extension curve. C . credit cost curve. d. terms of sale graph. e. economic order quantity graph. SECTION: 21.4 TOPIC: CREDIT COST CURVE TYPE: DEFINITIONS 9. A captive finance company is: A . a wholly-owned subsidiary that handles the credit function for the parent firm. b. controlled disbursements company which controls the accounts payables for the parent firm. c. a wholly-owned subsidiary which handles all the long-term debt obligations of the parent firm. d. a loan company which provides financing strictly to a particular industry, such as retail furniture stores. e. a consumer loan company which operates in one clearly defined and limited geographic area. SECTION: 21.4 TOPIC: CAPTIVE FINANCE COMPANY TYPE: DEFINITIONS 21-3
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Chapter 021 Credit and Inventory Management 10. The basic factors to be evaluated in the credit evaluation process, the five Cs of credit, are: a. conditions, control, cessation, capital, and capacity. b. conditions, character, capital, control, and capacity.
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chap021 - Chapter 021 Credit and Inventory Management...

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