What is credit scoring? In what types of situations is it most useful? If you were developing a credit scoring model, what factors might be most useful in predicting whether or not a credit customer would pay in a timely manner?
Answer to relevant QuestionsWhat are the key variables to consider when evaluating potential changes in a firm’s credit standards? Why are only variable costs of sales included when estimating the firm’s average investment in accounts receivable? King Manufacturing turns its inventory 9.1 times each year, has an average payment period of 35 days, and has an average collection period of 60 days. The firm’s annual sales are $72 million, its cost of goods sold ...Litespeed Products buys 200,000 motors per year from a supplier that can fulfill orders within two days of receiving them. Litespeed transmits its orders to this supplier electronically so the lead time to receive orders is ...United Worldwide’s accounts receivable totaled $1.75 million on August 31, 2012. The table below gives a breakdown of these outstanding accounts on the basis of the month of the initial credit sale. The firm extends net ...How can a firm in need of short-term financing decide whether or not to take a cash discount offered by its supplier? How would this decision change in the event the firm has no alternative source of short-term financing? ...
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