Management and Organizational Studies 2310A/B Lecture Notes - Lecture 6: Net Present Value, Telephone Call, Credit Risk

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 2310A/B
• Professor: Jun Wang

Document Summary

Granting credit increases sales: trade credit vs. consumer credit. Trade credit transaction occur between two companies (trade) Benefit may be able to increase the price. Costs of granting credit: chance that customers won"t pay, financing receivables. If you need to use the money, you need to borrow or think of ways to finance. Credit management examines the trade-off between increased sales and the costs of granting credit: if benefit is greater than cost, then grant the credit sale. Terms of sale: conditions on which a firm sells its goods and services for cash or credit. Credit analysis: distinguishing between good customers that will pay and bad customers that will default. Collection policy: effort expended on collecting on receivables. The basic length of time for which credit is granted, normally 30- Credit period that we offer is effectively the buyer"s payables. 120 days. period: if firm a sells to firm b.