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1414 why are the risks involved in international

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Unformatted text preview: credit scoring is typically applied to consumer credit decisions rather than to mercantile credit decisions. 14–13 What are the basic tradeoffs in a tightening of credit standards? 14–14 Why are the risks involved in international credit management more complex than those associated with purely domestic credit sales? 14–15 Why do a firm’s regular credit terms typically conform to those of its industry? 14–16 Why should a firm actively monitor the accounts receivable of its credit customers? How do the techniques of average collection period and aging of accounts receivable work? LG6 14.5 Management of Receipts and Disbursements As discussed in the previous section, the average collection period (the second component of the cash conversion cycle) has two parts: (1) the time from sale until the customer mails the payment and (2) the receipt, processing, and collection time. The third component of the cash conversion cycle, the average payment period, also has two parts: (1) the time from purchase of goods on account CHAPTER 14 Hint The financial manager of a small business must have a very strong relationship with a commercial banker. Because the small firm cannot afford to hire someone strickly as a manager of rece...
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