FM27 1 - Chapter 27 Providing and Obtaining Credit ANSWERS...

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Answers and Solutions: 27 - 1 Chapter 27 Providing and Obtaining Credit ANSWERS TO END-OF-CHAPTER QUESTIONS 27-1 a. Cash discounts are often used to encourage early payment and to attract customers by effectively lowering prices. Credit terms are usually stated in the following form: 2/10, net 30. This means a 2 percent discount will apply if the account is paid within 10 days, otherwise the account must be paid within 30 days. b. Seasonal dating sets the invoice date, or date at which the credit and discount periods begin, to a time during the buyer’s own selling season, regardless of the actual sale date. c. An aging schedule breaks down accounts receivable according to how long they have been outstanding. This gives the firm a more complete picture of the structure of accounts receivable than that provided by days sales outstanding. Days sales outstanding (DSO) is a measure of the average length of time it takes a firm's customers to pay off their credit purchases. d. The payments pattern approach is a procedure which measures any changes that
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.

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