Management and Organizational Studies 2310A/B Study Guide - Midterm Guide: Effective Interest Rate, European Cooperation In Science And Technology, Gross Profit

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

Document Summary

Firms hold inventories to ensure they have finished goods to meet sales demand and raw materials and wip when they are needed in production. Credit to other firm=trade credit, credit to consumers= consumer credit. Trade credit is a very important source of financing table 18. 2 (chapter 18). When granting credit, must establish procedures for extending and collecting. 1-terms of sale: does firm require cash or extend credit. If granting credit, terms of sale specifies the credit period, the cash discount and discount period, and the type of credit instrument. 2-credit analysis: distinguishing b/w consumers who will and wont pay, procedures to determine probability consumers don"t pay=credit analysis. 3-collection policy: after credit granted, firm could have cash collection issues when it becomes due, so it must establish a collection policy. 4-firms account is credited for the amount of the cheque. To reduce receivables period is to speed up cheque mailing, processing and clearing.