1. Why should management be concerned about paying its invoices on a timely basis?

2. Why is it important for a firm to maintain a satisfactory credit rating?

3. Suppose you are the new controller of a small but growing company and you find that the firm has a policy of paying cash for all purchases of goods even though it could obtain credit. The president of the company does not like the idea of having debts, but the vice president thinks this is a poor business policy that will hurt the firm in the future. The president has asked your opinion. Would you agree with the president or the vice president? Why?

4. How would excessive investment in merchandise harm a business?

5. How can good controls over purchases protect a firm from fraud and errors and from excessive investment in merchandise?

6. Why should management be concerned about internal controls over purchases?