Mini Case:22 - 21decrease sales (fewer customers would qualify for credit), decrease the level of receivables held, and would cause a decrease in the amount of bad debt expenses. The level of receivables held would be decreased due to the lower level of sales and also the probability that customers now qualifying for credit would take less time to pay. Bad debt expenses should decrease due to raising customers’ minimum acceptable financial positions. Finally, collection policyrefers to the procedures that the firm follows to collect past-due accounts. These can range from a simple letter or phone call to turning the account over to a collection agency. A tight collection policy would decrease the level of receivables held, as customers would decrease the length of time they took to pay their bills. A tight collection policy would also cause a decrease in the amount of bad debt losses the firm incurred.
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