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Unformatted text preview: ch28 Student: _______________________________________________________________________________________ Multiple Choice Questions 1. Selling goods and services on credit is: A. an investment in a customer. B. never necessary unless customers cannot pay for the goods. C. a decision independent of customers. D. permissible if your bank lends the money. E. None of the above. 2. When credit is granted to another firm this gives rise to a(n): A. accounts receivable and is called a consumer credit. B. credit due and is called an installment note. C. accounts receivable and is called trade credit. D. trade receivable and is called an installment note. E. None of the above. 3. Cash discounts: A. conveniently separate the pricing of credit and cash customers. B. lower profit margins on sales. C. speed the collection of receivables. D. All of the above. E. Both A and B. 4. Which of the following is not one of the "five C's of Credit" for credit scoring? A. Capability B. Capacity C. Capital D. Character E. Conditions 5. The average collection period measures: A. the average time necessary to collect a credit sale. B. how long the companies money is invested in their customers. C. the days sales outstanding. D. All of the above. E. None of the above. 6. Factoring refers to: A. determining the aging schedule of the firm's accounts receivable. B. the sale of a firm's accounts receivable to a financial institution. C. the determination of the average collection period. D. scoring a customer based on the 5 C's of credit. E. All of the above. 7. Captive finance companies are: A. parent companies to the subsidiary. B. subsidiaries to the parent company. C. used by firms with good credit ratings. D. Both A and B. E. Both B and C. 8. When a firm sells its accounts receivables to a financial institution, it is called: A. captive financing. B. collateralization. C. securitization. D. legalization. E. None of the above. 9. The three components of credit policy are: A. collection policy, credit analysis, and interest rate determination. B. collection policy, credit analysis, and terms of the sale. C. collection policy, interest rate determination, and repayment analysis. D. credit analysis, repayment analysis, and terms of the sale. E. interest rate determination, repayment analysis and terms of sale. 10. On September 1, a firm grants credit with terms of 2/10 net 45. The creditor: A. must pay a penalty of 2% when payment is made later than September 1st. B. must pay a penalty of 10% when payment is made later than 2 days after September 1st. C. receives a discount of 2% when payment is made at least 10 days before September 1st. D. receives a discount of 2% when payment is made before September 1 st and pays a penalty of 10% if payment is made after September 1st....
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This note was uploaded on 12/21/2011 for the course NIKA 101 taught by Professor Temur during the Spring '11 term at Acton School of Business.
- Spring '11