Exam 18: The Management of Accounts Receivable and Inventories

Accounts receivable consist of the credit of the business.It can take the form of which of the following?

The is the inventory level at which an order should be placed for replenishment of an item.

The likelihood that a customer will fail to repay credit extended to it is referred to as:

The most widely known credit reporting organization is:

The United Shoe Company (USC) does not extend credit to any retail shoe store with a "Fair" or "Limited" Dun and Bradstreet credit rating.As a result of this policy the company loses $36,500,000 in sales each year.Based on prior experience with these types of customers, USC estimates that the average collection period would be 120 days and the bad-debt loss ratio would be 10%.The firm's variable cost ratio is 0.75.USC's required pretax return on receivables investments is 18%.Determine the net change in pretax profits of extending credit to these retail shoe stores.(Assume 365 days per year in any calculations.)

are the criteria the firm uses to screen credit applicants in order to determine which of its customers should be offered credit and how much.

The primary goal of accounts receivable management should be

All of the following are possible solutions to a large bad-debt loss ratio EXCEPT:

Haulsee Inc.builds 800,000 golf carts a year and purchases the electronic motors for these carts for $370 each.Ordering costs are $540 and Haulsee's inventory carrying costs average 14% of the inventory value.What is the optimal ordering frequency?

Describe how an aging of accounts is a useful monitoring technique for accounts receivable.

The most widely known credit-reporting organization is:

Which of the following is not a cost related to the extension of credit to customers?

The measures the promptness with which customers repay their credit obligations.

Maximizing shareholder wealth by investing in accounts receivables is considered when:

Safety stock is needed to absorb

Mace Auto Parts Company sells to retail auto supply stores on credit terms of "net 60." Annual credit sales are $300 million (spread evenly throughout the year) and its accounts average 28 days overdue.The firm's variable cost ratio is 0.75 (i.e., variable costs are 75 percent of sales).When converting from annual to daily data or vice versa, assume there are 365 days per year.Suppose that Mace's sales are expected to increase by 20 percent next year and, through more effective collection methods, the firm is able to reduce its average collection period by 20 days.Determine the firm's average investment in receivables for next year under these conditions.

Inventory related costs are all of the following EXCEPT:

Cycles de Oro produces 120,000 high-tek bikes a year and orders the brake assembly from IKON for $15.40 each.The order cost is $84 and Cycles estimates their inventory carrying costs are 15%.What is their total ordering cost per year?

Increasing collection expenditures is likely to result in

For the firm with a seasonal sales pattern, offering seasonal datings to its customers is likely to result in