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Unformatted text preview: stent with the firm’s credit standards. Two popular
credit selection techniques are the five C’s of credit
and credit scoring. Changes in credit standards can
be evaluated mathematically by assessing the effects
of a proposed change in profits on sales, the cost of
accounts receivable investment, and bad-debt costs.
LG4 Review the procedures for quantitatively considering cash discount changes, other aspects of
credit terms, and credit monitoring. Changes in
credit terms (particularly the initiation of, or a
change in, the cash discount) can be quantified in a
way similar to that for changes in credit standards.
Changes in the cash discount period can also be
evaluated using similar methods. Credit monitoring,
the ongoing review of customer payment of
accounts receivable, frequently involves use of the
average collection period and the aging of accounts
receivable. A number of popular collection techniques are used by firms.
LG5 Understand the management of receipts and
disbursements, including float, speeding collections, slowing payments, cash concentration,...
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