Suppose you work for a small local department store that manages its own accounts receivable with a private charge card. Your boss has told you to improve the average collection period from 30 to 20 days. How would you go aboutthis? What are the risks in your proposal that might affect the company negatively? (Multiple choice, pick one)

A.

Some ways to reduce the receivables collection period are to be more stringent in granting credit, to decrease the payment period allowed, to decrease the interest charges on continuing balances, to place overdue bills with collection agencies more quickly, and to write off less bad debts. The risk in each of these steps is fewer credit sales and reduced customer loyalty.

B.

Some ways to reduce the receivables collection period are to be more lenient in granting credit, to decrease the payment period allowed, to decrease the interest charges on continuing balances, to never place overdue bills with collection agencies and to never write off bad debts. The risk in each of these steps is more credit sales that may be uncollectible.

C.

Some ways to reduce the receivables collection period are to be more stringent in granting credit, to decrease the payment period allowed, to increase the interest charges on continuing balances, to place overdue bills with collection agencies more quickly, and to write off bad debts more rapidly. The risk in each of these steps is fewer credit sales and reduced customer loyalty.

D.

Some ways to reduce the receivables collection period are to be more lenient in granting credit, to decrease the payment period allowed, to decrease the interest charges on continuing balances, to eliminate placing overdue bills with collection agencies, and to write off bad debts less frequently. The risk in each of these steps is more credit sales.